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Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8...

Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years.

Time: 0 1 2 3 4 5
Cash flow: –$1,000 $480 $480 $520 $300

$100

Calculate discounted payback period in years

Solutions

Expert Solution

Discounted PBP = 2.35 Years
Time Amount PVf at 8% PV Cumulative
                                                                              -                    (1,000.00)                 1.0000              (1,000.00)              (1,000.00)
                                                                         1.00                        480.00                 0.9259                    444.44                 (555.56)
                                                                         2.00                        480.00                 0.8573                    411.52                 (144.03)
                                                                         3.00                        520.00                 0.7938                    412.79                    268.76
                                                                         4.00                        300.00                 0.7350                    220.51                    489.27
                                                                         5.00                        100.00                 0.6806                      68.06                    557.33
PBP = 2 + 144.03/412.79
PBP = 2 + .35
PBP = 2.35 Years

jeff jeffy answered 1 year ago
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