Find the Discounted Payback period for the following project. The discount rate is 9% Project X...

Question

Question

Find the Discounted Payback period for the following project. The discount rate is 9% Project X Initial Outlay $8,236 Year 1

Answer 1

Answer #1


Project			Discount rate=	0.09
Year	Cash flow stream	Cumulative cash flow	Discounting factor	Discounted CF	Cumulative cash flow	Cumulative discounted CF
0	-8236	-8236	1	-8236	-8236	-8236
1	3283	-4953	1.09	3011.927	-4953	-5224.07
2	3625	-1328	1.1881	3051.09	-1328	-2172.98
3	5116	3788	1.295029	3950.491	3788	1777.507
4	7409	11197	1.411582	5248.722	11197	7026.23
Discounted payback period is the time by which discounted cashflow cover the intial investment outlay
this is happening between year 2 and 3
therefore by interpolation payback period = 2 + (0-(-2172.98))/(1777.51-(-2172.98))
2.55 Years

Where
Discounting factor =(1 + discount rate)^(corresponding year)
Discounted Cashflow=Cash flow stream/discounting factor

Answer 2

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