Question

Find the Biscounted Payback period for the following project. The discount rate is 8% Project X Initial Outlay $17,573 Year 1

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Answer #1

Time Cash flow Discount Factor Discounted Cash Flow Cumulative Discounted cash flow (17,573.00) Initial Outlay 1.00000 (17,57

Un-recovered amount Payback Period = Years before full recovery+- cash flow during the period

= 3+ 2508.22 6426.37

= 3.39 years

Formula for discount factor:

Discount Factor = 7 (1+i)n

Where,
i = discount rate
n = number of periods

Discounted cash flow = cash flow * discount factor.

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