Question

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively.

Time:	0	1	2	3	4	5
Cash flow	–$237,000	$66,000	$84,200	$141,200	$122,200	$81,400

discounted payback=_____ year (round your final answer to 2 decimal places.)

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively.

Time:	0	1	2	3	4	5
Cash flow:	–$238,000	$66,100	$84,300	$141,300	$122,300	$81,500

PI=____? (round your final answer to 2 decimal places.)

Answer 1

1:

Discounted Payback

3.07

Discounted Payback = Year in which Discounted Cumulative CF is last negative -(Last negative discounted cumulative CF/ CF of next year)

Time:	0	1	2	3	4	5
Cash flow	-237000	66000	84200	141200	122200	81400
Discounted CF	-237000	59459.46	68338.61	103244.2	80496.93	48306.94
Cumulative DCF	-237000	-177541	-109202	-5957.71	74539.22	122846.2
Discounted Payback	3.07

2:

PI

1.51

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