A specialized automatic machine costs $100,000 and is expected to save $19,700 per year while in...

A specialized automatic machine costs $100,000 and is expected to save $19,700 per year while in operation. Using a 5 % interest rate, what is the discounted payback period (in years).

Expert Solution

Ans 6 years

Year	Project Cash Flows (i)		DF@ 11% (ii)	PV of Project A ( (i) * (ii) )	Cumulative Cash Flow
0	-100000		1	(1,00,000.00)	(1,00,000.00)
1	19700		0.952	18,761.90	(81,238.10)
2	19700		0.907	17,868.48	(63,369.61)
3	19700		0.864	17,017.60	(46,352.01)
4	19700		0.823	16,207.24	(30,144.78)
5	19700		0.784	15,435.47	(14,709.31)
6	19700		0.746	14,700.44	(8.87)
7	19700		0.711	14,000.42	13,991.56
8	19700		0.677	13,333.74	27,325.29
		NPV		27,325.29


Discounted Payback Period =		6 years + 8.87/14000.42
		6.00 years

jeff jeffy answered 6 months ago

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