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17. Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept...

17. Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent and the maximum allowable discounted payback is 3 years.

  Time: 0 1 2 3 4 5
  Cash flow: -990 440 540 460 360 210

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Expert Solution

Discounted payback of this project is 2.46 years and project is acceptable.

Year Cash Flow Discount factor Discounted Cash Flow Cumulative Discounted Cash Flow
a b c=1.11^-a d=b*c e
0 $           -990      1.0000            -990           -990
1                 440      0.9009              396           -594
2                 540      0.8116              438           -155
3                 460      0.7312              336            181
4                 360      0.6587              237            418
5                 210      0.5935              125            543
Discounted Payback = 2+(155/336)
= 2.46 Years

jeff jeffy answered 4 months ago
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