Question

An investment project has annual cash inflows of $5,800, $6,100, $6,900, and $8,200, and a discount rate of 14%.

What is the discounted payback period for these cash flows if the initial cost is $8,100? (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 $11,610? (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 $15,120? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Discounted payback period             years

Answer 1

Working of PV of cash inflows-
Year	Inflow	PV fator	PV of inflow
1	5800	0.88	5,087.72
2	6100	0.77	4,693.75
3	6900	0.67	4,657.30
4	8200	0.59	4,855.06
PV of inflows			19,293.83
(i)	Initial investment	8,100.00
Less:	PV of inflow in 1st year	5,087.72
	Remaining amount	3,012.28
	PV of inflow in second year	4,693.75
	Period to cover remaining amount	0.64
	Total payback period	1.64
(ii)	Initial investment	11,610.00
Less:	PV of inflow in 1st year	5,087.72
	PV of inflow in second year	4,693.75
	Remaining amount	1,828.53
	PV of inflow in third year	4,657.30
	Period to cover remaining amount	0.39
	Total payback period	2.39
(iii)	Initial investment	15,120.00
Less:	PV of inflow in 1st year	5,087.72
	PV of inflow in second year	4,693.75
	PV of inflow in third year	4,657.30
	Remaining amount	681.23
	PV of inflow in fourth year	4,855.06
	Period to cover remaining amount	0.14
	Total payback period	3.14