Question

An investment project costs $10,000 and has annual cash flows of $2,890 for six years. a. What is the discounted payback period if the discount rate is zero percent? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period if the discount rate is 4 percent? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period if the discount rate is 21 percent? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Discounted payback period b. Discounted payback period Discounted payback period 3.46 years years years

Answer 1

year cash flows 51 $2,890 $2,890 $10,000 $2,890 $2,890 $2,890 $2,890 discounted payback period @ 0% 3.46 years [ 10,000 = 2890 ] 1 2 6 $10,000 year cash flows pv @4% present value cumulative discounted cash flows $2,890 0.9615 $2,779 $7,221 $2,890 0.9246 $2,672 -$4,549 $2,890 0.8890 $2,569 -$1,980 $2,890 0.8548 $2,470 $490 5 $2,890 0.8219 $2,375 $2,866 $2,890 0.7903 $2,284 $5,150 $10,000 $10,000 discounted payback period @ 4% years 3.80 3+(1980/2470) -$10,000 year cash flows pv @ 21% present value cumulative discounted cash flows $2,890 0.8264 $2,388 -$7,612 $2,890 0.6830 $1,974 -$5,638 $2,890 0.5645 $1,631 -$4,006 $2,890 0.4665 $1,348 -$2,658 $2,890 0.3855 $1,114 -$1,544 $2,890 0.3186 $921 -$623 -$10,000 $10,000 discounted payback period 0.00 years