Question

(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) $(210) 85 60 95 If the project's appropriate discount rate is 12 percent, what is the project's discounted payback period? The project's discounted payback period is years. (Round to two decimal places.)

Answer 1

Year	Cashflows ($ in millions)	Discounting factor @ 12%	Discounted cashflows ($ in millions)	Discounted cumulative cashflows ($ in millions)
0	-210	1	-210.00	-210.00
1	85	0.892857143	75.89	-134.11
2	60	0.797193878	47.83	-86.28
3	85	0.711780248	60.50	-25.77
4	95	0.635518078	60.37	34.60
Discounted payback period= A+ (B/C)
where,
A= last period number with negative discounted cumulative cashflows
B= absolute value of discounted cumulative net cashflow at the end of period A
C= total discounted cash inflow during the period following period A
Discounted payback period = 3+(25.77/60.37)
	3.43 years