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Given CFO=-$200; CF1 = $75; CF2 = $75; CF3 = $75; and CF4 = $100. Calculate the undiscounted payback in years. Assume cash flGiven CFO=-$200; CF1 = $75; CF2 = $75; CF3 = $75; and CF4 = $100. Calculate the discounted payback in years with 8.5% cost of

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Answer #1

a)

amount owed after year 2 = 200 - 75 - 75

= 50

undiscounted payback period = 2 + 50/75 = 2.67

choose c)

b)

YEAR CASH FLOW Discounted cash flow Cumulative cash flow

Cumulative discounted cash flow
0 -200 -200 -200 -200
1 75 69.12442396 -125 -130.875576
2 75 63.70914651 -50 -67.16642953
3 75 58.71810738 25 -8.448322145
4 100 72.15742843 125 63.70910628

discounted payback period

= 3 +  8.448322145/63.70910628

= 3.117

choose B)

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