In: Finance
A project has an initial cost of $8,500 and produces cash inflows of $2,700, $5,000, and $1,600 over the next three years, respectively. What is the discounted payback period if the required rate of return is 7 percent?
A) 2.30 years
B) 2.15 years
C) 2.91 years
D) never
E) 2.50 years
Calculation of Discounted Payback period | ||||
Time | Amount | PVf | PV | Cumulative |
- | (8,500.00) | 1.00 | (8,500.00) | (8,500.00) |
1.00 | 2,700.00 | 0.93 | 2,523.36 | (5,976.64) |
2.00 | 5,000.00 | 0.87 | 4,367.19 | (1,609.44) |
3.00 | 1,600.00 | 0.82 | 1,306.08 | (303.37) |
From the above data, payback can never be calculated. | ||||
So correct answer is never. |