Question

what is discounted payback for 11%

ome File Tab Edit History Window Help View Bookmarks People MyUSF x Assignments: FIN3403 Spring X CH 9 HW newconnect.mheducation.com/flow/connect.html Saved CH 9 HW Check my work mode: This shows what is correct or incorrect for the worky 6 Consider the following two mutually exclusive projects: Year 33 aoints Cash Flow (A) -$364,000 46,000 68,000 68,000 450,000 Cash Flow (B) -$52,000 25,000 22,000 21,500 17,500 Whichever project you choose, if any, you require a return of 11 percent on your a-1. What is the payback period for each project? (Do not round intermediate ca places, e.g., 32.16.) Answer is complete and correct. Payback period 3.40 Years 2.23 Years Project A Project B < Prey 6 of 15 !

Answer 1

We know that,

Discounted Payback = Total years before recovery + ( unrecovered amount remaining)/ cash flow remaining

Project A - Discounted Payback = 3.721406 years

Project A - Discounted Payback = 2.73927 years

I have demonstrated this concept below :

в H. PV of C flow Project A 0 nmano 2 3 4 -364000 46000 68000 68000 458000 41441.44144 =B3/(1+$C$8)^A3 55190.32546 =B4/(1+$C$8)^A4 49721.01393 =B5/(1+$C$8)^A5 301698.7862 =B6/(1+$C$8)^A6 F G Cumulitive cash flow Project B PV of C Flow Cumulitive cash flow -52000 41441.44144 25000 22522.52252 =F3/(1+$C$8)^A3 22522.52252 96631.7669 22000 17855.69353 =F4/(1+$C$8)^A4 40378.21605 146352.7808 21500 15720.6147 =F5/(1+$C$8)^A5 56098.83075 448051.567 17500 11527.79205 =F6/(1+$C$8)^A6 448051.567 exceeds 364000, hence 4th year cannot 56098.83075 exceeds 52000, hence 3rd year be included completely. We will take 3 years cannot be included completely. We will take completely and some fraction from 4th year 2years completely and some fraction from Answer 3rd year 11% Cost Discounted payback= For A Discounted pay back 3+ (364000-146352.7808)/301698.8 3.721406 OEMFOF For B Discounted Payback 2 + (52000-40378.21605)/15720.6147 2.73927

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