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Using a 7% annual cost of capital, what is the discounted payback period in years of...

Using a 7% annual cost of capital, what is the discounted payback period in years of the potential project below? round to 2 decimals

Year-----Cash Flows
0..............-5000
1...............1625
2..............1668
3..............1616
4..............1679
5..............1619

can you please let me know how you find this? especially if using a financial calculator. Thanks!

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Expert Solution

Ans 3.55 years

Year Project Cash Flows (i) DF@ 7% (ii) DF@ 7% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -5000 1 1                             (5,000.00)                (5,000.00)
1 1625 1/ (1 + 7%)^1 0.935                              1,518.69                (3,481.31)
2 1668 1/ (1 + 7%)^2 0.873                              1,456.90                (2,024.41)
3 1616 1/ (1 + 7%)^3 0.816                              1,319.14                   (705.28)
4 1679 1/ (1 + 7%)^4 0.763                              1,280.90                     575.63
5 1619 1/ (1 + 7%)^5 0.713                              1,154.32                 1,729.95
TOTAL                              1,729.95
Discounted Payback Period = 3 YEARS + 705.28 / 1280.90
3.55 YEARS

jeff jeffy answered 1 year ago
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