payback period = 2.5 years
hence
initial investment = 2.5 years cash flow
= 275000 + 400000 + (475000/2)
= 912500
NPV = -initial investment + PV of future cash flows
Present value = Future value/(1+i)^n
i = interest rate per period
n= number of periods
=>
NPV = -912500 + 275000/1.09 + 400000/1.09^2 + 475000/1.09^3 + 475000/1.09^4
= 379755
choose
the discounted payback period does not take the projects entire life into account
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