What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Year | Cash Flows |
0 | -4,379 |
1 | 1,963 |
2 | 2,710 |
3 | 2,546 |
4 | 1,962 |
Year | Cash flows | Present value@14% | Cumulative Cash flows |
0 | (4,379) | (4,379) | (4,379) |
1 | 1,963 | 1721.93 | (2657.07) |
2 | 2,710 | 2085.26 | (571.81) |
3 | 2,546 | 1718.48 | 1146.67 |
4 | 1,962 | 1161.66 | 2308.33 |
Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).
=2+(571.81/1718.48)
=2.33 years(Approx).
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