A project has an initial cost of $8,500 and produces cash inflows of $2,700, $5,000, and...

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

Expert Solution

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.

jeff jeffy answered 8 months ago

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