Question

Compute the discounted payback statistic for Project C if the appropriate cost of capital is 7 percent and the maximum allowable discounted payback period is three years. Having a hard time coming up with the solution to this problem. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project C

Time:

Cash flow: –    0          1          2       3         4      5

                     $2,000   $880 $780   $820 $500 $300

Should I accepted or rejected the problem?

Discounted payback period

years

Answer 1

Ans 2.74 years

Year	Project Cash Flows (i)	DF@ 7%	DF@ 7% (ii)	PV of Project A ( (i) * (ii) )	Cumulative Cash Flow
0	-2000	1	1	(2,000.00)	(2,000.00)
1	880	1/((1+7%)^1)	0.935	822.43	(1,177.57)
2	780	1/((1+7%)^2)	0.873	681.28	(496.29)
3	820	1/((1+7%)^3)	0.816	669.36	173.08
4	500	1/((1+7%)^4)	0.763	381.45	554.52
5	300	1/((1+7%)^5)	0.713	213.90	768.42
		NPV		768.42
Discounted Payback Period =		2 years + 496.29/669.36
		2.74 years