Question

Siblene Penn is considering a project that has the following cash flow data. What is the discounted payback using a 11.2% cost of capital?

Year 0 1 2 3 4 5

Cash flows -$6,750 $2,000 $2,025 $2,050 $2,075 $2,100

Answer 1

Discounted Payback period= A+(B/C)
Where,
A=last period number with negative cumulative present value of cashflows
B=absolute value of cumulative present value of net cashflow at the end of period A
C=total present value of cash inflow during the period following period A
Year	Cashflow	Discount [email protected]%	Present value	Cumulative present value
0	-6,750.00	1.00	-6,750.00	-6,750.00
1	2,000.00	0.90	1,798.56	-4,951.44
2	2,025.00	0.81	1,637.63	-3,313.81
3	2,050.00	0.73	1,490.87	-1,822.94
4	2,075.00	0.65	1,357.06	-465.88
5	2,100.00	0.59	1,235.08	769.20
Discounted Payback period=	4+(465.88/1235.08)
	4.38	years