Updates Not Installed Some updates could not automatically Week 3 Problems ms Sa

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Updates Not Installed Some updates could not automatically Week 3 Problems ms Saved Help Save & Exit Submit nvestment project has annual cash inflows of $5,100, $3.200, $4,400, and $3,600, and a discount rate of 15 percent. What is the discounted payback period for these cash flows if the initial cost is $5,000? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period ? ? years What is the discounted payback period for these cash flows if the initial cost is $7100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g 32.16.) Discounted payback period - years What is the discounted payback period for these cash flows if the initial cost is $10,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback periodyears

Explanation / Answer

Discounted payback for $5,000 initial cost = 1.23 years Discounted payback for $7,100 initial cost = 2.08 years Discounted payback for $10,100 initial cost = 3.17 years When we use discounted payback, we need to find out the value of all cash flows today. The present value of the projected cash flows are :- Value of year 1 cash flow = $5,100 / (1.15) = $ 4,434.78 Value of year2 cash flow = $3,200 / (1.15)^2 = $ 2,419.66 Value of year 3 cash flow = $4,400 / (1.15)^3 = $ 2,893.07 Value of year 4 cash flow = $3600 / (1.15)^4 = $ 2,058.31 1 Discounted payback for $5,000 initial cost: Discounted payback period = 1 + ($5,000 - $4,434.78) / $2419.66 = 1.23 years 2 Discounted payback for $7,100 initial cost: Discounted payback period = 2 + ($7,100 - $4,434.78 - $2,419.66) / $2,893.07 = 2.08 years 3 Discounted payback for $10,100 initial cost: Discounted payback period = 3 + ($10,100 - $4,434.78 - $2,419.66 - $2,893.07) / $2,058.31 = 3.17 years

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