A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 9 years, and a cost of capital of 11%. What is the project's discounted payback period? Round your answer to two decimal places.

It will take 7 years and 156 days to pay back.

Explanation:

Giving the following information:

A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 9 years, and a cost of capital of 11%.

To calculate the discounted payback period, we need to discount each cash flow until the initial investment is cover.

PV = Cf / (1+i) ^n

Discounted cash flow Pay back

Year 1 = 9,000 / (1.11) = 8,108.11 31,819.89

Year 2 = 9,000 / (1.11^2) = 7,304.60 24,515.29

Year 3 = 9,000 / (1.11^3) = 6,580.72 17,934.57

Year 4 = 9,000 / (1.11^4) = 5,928.58 12,005.99

Year 5 = 9,000 / (1.11^5) = 5,341.06 6,664.93

Year 6 = 9,000 / (1.11^6) = 4,811.77 1,853.16

Year 7 = 9,000 / (1.11^7) = 4,334.93 0

To be more accurate:

(1,853.16/4334.93) * 365 = 156 days

It will take 7 years and 156 days to pay back.