In: Finance
An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14%.
What is the discounted payback period for these cash flows if the initial cost is $7,000? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Discounted payback period years
What is the discounted payback period for these cash flows if the initial cost is $10,000? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Discounted payback period years
What is the discounted payback period for these cash flows if the initial cost is $13,000? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Discounted payback period years
The Discounted Payback Period (or DPP)
is X + Y/Z Here • X = is the last time period where the cumulative discounted cash flow (CCF) was negative • Y = is the absolute value of the CCF at the end of that period X • Z = is the value of the DCF in the next period after X |
Calculation of the Discounted payback period IF initial investment is $ 7000
Cumulative cash flows :-
Particulars | CF | PVF@14% | Discounted CF | Cumualtive DCF |
Year 0 | -7000 | 1 | -7000 | -7000 |
Year 1(x) | 4200 | 0.877193 | 3684.210526 | -3315.79(y) |
Year 2 | 5300 | 0.769468 | 4078.177901(Z) | 762.3884 |
Year 3 | 6100 | 0.674972 | 4117.326249 | 4879.715 |
Year 4 | 7400 | 0.59208 | 4381.394053 | 9261.109 |
Discounted payback period if initial investment is $ 7000 = 1years + 3315.79 /4078.177901 = 1 + 0.8130566 = 1.81 years
Calculation of the Discounted payback period IF initial investment is $ 10,000
Cumulative cash flows :-
Particulars | CF | PVF@14% | Discounted CF | Cumualtive DCF |
Year 0 | -10000 | 1 | -10000 | -10000 |
Year 1 | 4200 | 0.877193 | 3684.210526 | -6315.79 |
Year 2(x) | 5300 | 0.769468 | 4078.177901 | -2237.61(y) |
Year 3 | 6100 | 0.674972 | 4117.326249(z) | 1879.715 |
Year 4 | 7400 | 0.59208 | 4381.394053 | 6261.109 |
Discounted payback period if initial investment is $ 10,000= 2years + 2237.61/4117.326249 = 2 + 0.5434623 = 2.54 years
Calculation of the Discounted payback period IF initial investment is $ 13,000
Cumulative cash flows :-
Particulars | CF | PVF@14% | Discounted CF | Cumualtive DCF |
Year 0 | -13,000 | 1 | -13000 | -13000 |
Year 1 | 4200 | 0.877193 | 3684.210526 | -9315.79 |
Year 2 | 5300 | 0.769468 | 4078.177901 | -5237.61 |
Year 3(X) | 6100 | 0.674972 | 4117.326249 | -1120.29(Y) |
Year 4 | 7400 | 0.59208 | 4381.394053(Z) | 3261.109 |
Discounted payback period if initial investment is $ 13,000= 3years + 1120.29/4381.394053 = 3+ 0.2546915 = 3.26years