question archive Given the Cash Flows of a Project below, compute for the Discounted Payback Period
Given the Cash Flows of a Project below, compute for the Discounted Payback Period
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Given the Cash Flows of a Project below, compute for the Discounted Payback Period. Consider a Cost of Capital of 12%. Year 0 1 2 3 4 5 CF -45,000 10,000 26,000 17,500 13,200 20,000 A. 3.27 years B. 3.53 years C. 4.00 years D. 4.65 years E. 4.23 years
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Year CF PV factor PV × CF Total CF
0 -45,000 1 -45,000
1 10,000 0.893 8,930 8,930
2 26,000 0.797 20,722 29,652
3 17,500 0.712 12,460 42,112
4 13,200 0.636 8,395 50,507
5 20,000 0.567 11,340 61,847
Discounted payback period=3 years +( 2,888÷8,395)
= 3 + 0.344=3.34 years
Option A is correct which is near to my answer
