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What is the discounted payback period of the following investment if the required return is 10%?...

What is the discounted payback period of the following investment if the required return is 10%?

Year Cash Flows

0 = -$90

1 = $30

2 = $35

3 = $30

4 = $25

5 = $20

Solutions

Expert Solution

Ans 3.66 years

Year Project Cash Flows (i) DF@ 10% DF@ 10% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -90 1 1                                   (90.00)                      (90.00)
1 30 1/((1+10%)^1) 0.909                                     27.27                      (62.73)
2 35 1/((1+10%)^2) 0.826                                     28.93                      (33.80)
3 30 1/((1+10%)^3) 0.751                                     22.54                      (11.26)
4 25 1/((1+10%)^4) 0.683                                     17.08                          5.81
5 20 1/((1+10%)^5) 0.621                                     12.42                        18.23
NPV                                     18.23
Discounted Payback Period = 3 years + 11.26/17.08
3.66 years

jeff jeffy answered 1 year ago
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