A project has an initial cost of $350. The project has annual cash inflows of $200,...

A project has an initial cost of $350. The project has annual cash inflows of $200, $160, $100, and $150, for the next four years, respectively. The discount rate is 25%. What is the discounted payback period of the project?

a. the project never pays back

b. 1 year

c. 2 years

d. 3 years

e. 4 years

Solutions

Expert Solution

Answer:- Option (e):- 4 years as the discounted payback period is 3.59 years (Approx. 4 years)

Explanation:-

Discounted Payback Period Formula :-

=Year before the discounted payback period occurs + { Cumulative cash flow in year before recovery / Discounted cash flow in year after recovery }

Following is the excel sheet showing the calculation of discounted payback period:-

Following is the formula sheet of above excel sheet for easy understanding of the formulas used:-

jeff jeffy answered 1 year ago

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