Question

Find the Discounted Payback period for the following project. The discount rate is 10% Project X Initial Outlay $17,274 Year 1 $5,000 Year 2 $5,965 Year 3 $5,705 Year 4 $8,743 Round the answer to two decimal places.

Answer 1

Year	Cash flows	Present value@10%	Cumulative Cash flows
0	(17274)	(17274)	(17274)
1	5000	4545.45	(12728.55)
2	5965	4929.75	(7798.8)
3	5705	4286.25	(3512.55)
4	8743	5971.59	2459.04

Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=3+(3512.55/5971.59)

=3.59 years(Approx)