Find the discounted payback period for the following project. THe discount rate is 7%. Initial Outlay...

Find the discounted payback period for the following project. THe discount rate is 7%.

Initial Outlay - $8,273

Year 1 - $3.774

Year 2 - $3,300

Year 3 - $5,328

Year 4 - $7,303

Round the answer to two decimal places. Show your work.

Expert Solution


Calculation of payback period
Year	Cash flow	Cumulative Cash flow
0	-$8,273.00	-$8,273.00
1	$3,774.00	-$4,499.00
2	$3,300.00	-$1,199.00
3	$5,328.00	$4,129.00
4	$7,303.00	$11,432.00

Payback period = 2 years + [$1199/$5328] = 2.23 years


Calculation of discounted payback period
Year	Cash flow	Discount factor @ 7%	Present Values	Cumulative Present values
0	-$8,273.00	1.00000	-$8,273	-$8,273
1	$3,774.00	0.93458	$3,527	-$4,746
2	$3,300.00	0.87344	$2,882	-$1,864
3	$5,328.00	0.81630	$4,349	$2,486
4	$7,303.00	0.76290	$5,571	$8,057

Discounted Payback period = 2 years + [$1864/$4349] = 2.43 years

jeff jeffy answered 3 years ago

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