Find the discounted payback period. YEAR PROJECT A PROJECT B PROJECT C PROJECT D 0 (10,000)...

Find the discounted payback period.

YEAR	PROJECT A	PROJECT B	PROJECT C	PROJECT D
0	(10,000)	(15,000)	(20,000)	(30,000)
1	5,000	5,000	10,000	0
2	5000	5,000	10,000	0
3	20,000	5,000	4,000	100,000
4	1,000	10,000	2,000	120,000
5	-	5,000	-	60,000

answer : A(3 years) B(4years) C(4 years) D(3 years)

Pls show me the working on how to get the discounted payback period. Pls do not show the working in excel, pls do it manually and attached the formula and also pls explain how you get the answers. Thank you

Expert Solution

YEAR	Value of Project A	Cumulative value of Project A	Value of Project B	Cumulative value of Project B	Value of Project C	Cumulative value of Project C	Value of Project D	Cumulative value of Project D
0	-10000	-10000	-15000	-15000	-20000	-20000	-30000	-30000
1	5000	-10000+5000= -5000	5000	-15000+5000 = -10000	10000	-20000+10000 = -10000	0	-30000+0 = -30000
2	5000	-5000+5000 = 0	5000	-10000+5000 = -5000	10000	-10000+10000 = 0	0	-30000 + 0 = -30000
3	20000	0+ 20000 = 20000	5000	-5000+5000 = 0	4000	0+4000 = 4000	100000	-30000 + 100000 = 70000
4	1000	20000+1000 = 21000	10000	0+10000 = 10000	2000	4000 + 2000 = 6000	120000	70000 + 120000 = 190000
5	0	21000+0 = 21000	5000	10000+5000 = 15000	0	6000 + 0 = 6000	60000	190000 + 60000 = 250000

Discounted payback period is a variation of payback period which uses discounted cash flows while calculating the time an investment takes to pay back its initial cash outflow.

Note: As the interest rate is not mentioned in the question, Discounted payback period is equal to Payback period.

(i.e. discounted payback period with 0% interest rate.)

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In Layman term, discounted payback period is that period from which the project starts earning profit. (ie.Cumulative Value > 0)

Therefore, Discounted payback period for following project is:

A = 3 Years

B = 4 Years

C = 3 Years

D = 3 Years

jeff jeffy answered 1 year ago

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