Question

In: Finance

What is the discounted payback period for the investment project that has the following cash flows,...

What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Year Cash Flows

0 -13779

1 4470

2 5005

3 5877

4 6626

Solutions

Expert Solution

Ans 3.52 years

Year Project Cash Flows (i) DF@ 14% (ii) DF@ 14% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -13779 1 1                           (13,779.00)              (13,779.00)
1 4470 1/(1+14%)^1 0.877                              3,921.05                (9,857.95)
2 5005 1/(1+14%)^2 0.769                              3,851.18                (6,006.76)
3 5877 1/(1+14%)^3 0.675                              3,966.81                (2,039.95)
4 6626 1/(1+14%)^4 0.592                              3,923.12                 1,883.17
NPV                              1,883.17
Discounted Payback Period = 3 years + 2039.95 / 3923.12
3.52 years

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