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In periods 0-4, a project has the following cash flows: -3,000, 1000, 1000, 2,390, 500. Its...

In periods 0-4, a project has the following cash flows: -3,000, 1000, 1000, 2,390, 500.

Its cost of capital is 10 percent. What is the projects DISCOUNTED payback period?

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Expert Solution

Ans 2.70 years

Year Project Cash Flows (i) DF@ 10% DF@ 10% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -3000 1 1                             (3,000.00)                (3,000.00)
1 1000 1/((1+10%)^1) 0.909                                   909.09                (2,090.91)
2 1000 1/((1+10%)^2) 0.826                                   826.45                (1,264.46)
3 2390 1/((1+10%)^3) 0.751                               1,795.64                      531.18
4 500 1/((1+10%)^4) 0.683                                   341.51                      872.69
NPV                                   872.69
Discounted Payback Period = 2 years + 1264.46/1795.64
2.70 years

jeff jeffy answered 1 year ago
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