A project has an initial cost of $14,500 and produces cash inflows of $4,600, $6,100, and $8,500 over the next three years, respectively. What is the discounted payback period if the required rate of return is 15 percent?

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Business

Lina Gordon

18 July, 01:56

A project has an initial cost of $14,500 and produces cash inflows of $4,600, $6,100, and $8,500 over the next three years, respectively. What is the discounted payback period if the required rate of return is 15 percent?

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Gage Gould · Answer 1

The cash flows after discounted is

Years Annual cash flows Discount factor @15% Present value

0 $14,500 1 $14,500 (A)

1 $4,600.00 0.8695652174 $4,000.00

2 $6,100.00 0.7561436673 $4,612.48

3 $8,500.00 0.6575162324 $5,588.89

Total present value $14,201.36 (B)

Net present value - $298.64 (A - B)

Since net present value is negative, so we cannot determined the discounted pay back period