A project has an initial cost of $148,400 and is expected to produce cash inflows of...

A project has an initial cost of $148,400 and is expected to produce cash inflows of $56,500, $69,540, and $97,867 over the next three years, respectively. What is the discounted payback period if the required rate of return is 10 percent?

A. 2.12 years B. 2.54 years C. 2.91 years D. 1.88 years

Expert Solution

B. 2.54 years
Discounted PBP
Time	Amount	PVf	PV	Cumulative
-	(148,400.00)	1.00	(148,400.00)	(148,400.00)
1.00	56,500.00	0.9091	51,363.64	(97,036.36)
2.00	69,540.00	0.8264	57,471.07	(39,565.29)
3.00	97,867.00	0.7513	73,528.93	33,963.64

Discounted PBP = 2 + 39565.29/73528.93
Discounted PBP = 2 + .54 Years
Discounted PBP = 2.54 Years Approx

jeff jeffy answered 2 years ago

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