An investment project has annual cash inflows of $3,300, $4,200, $5,400, and $4,
ID: 2651882 • Letter: A
Question
An investment project has annual cash inflows of $3,300, $4,200, $5,400, and $4,600, for the next four years, respectively. The discount rate is 15 percent.
a) What is the discounted payback period for these cash flows if the initial cost is $6,000? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b) What is the discounted payback period for these cash flows if the initial cost is $8,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c) What is the discounted payback period for these cash flows if the initial cost is $11,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
An investment project has annual cash inflows of $3,300, $4,200, $5,400, and $4,600, for the next four years, respectively. The discount rate is 15 percent.
a) What is the discounted payback period for these cash flows if the initial cost is $6,000? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Statement showing calculation of NPV Particulars Time PVF@15% Amount PV(Amount *PVF) Cash Outflows - 1.0000 (6,000.000) (6,000.00) PV of Cash Outflows (6,000.00) Cash Inflows 1.000 0.8696 3,300.000 2,869.57 Cash Inflows 2.000 0.7561 4,200.000 3,175.80 Cash Inflows 3.000 0.6575 5,400.000 3,550.59 Cash Inflows 4.000 0.5718 4,600.000 2,630.06 PV of Cash Inflows 12,226.0212 Time PV of Cash inflows Cumulative Cash Flows 1.00 2,869.57 2,869.5652 2.00 3,175.80 6,045.3686 3.00 3,550.59 9,595.9563 4.00 2,630.06 12,226.0212 Discounted PBP = 1 + (6000 - 2869)/3175.8 = 1.985 Years Statement showing calculation of NPV Particulars Time PVF@15% Amount PV(Amount *PVF) Cash Outflows - 1.0000 (8,100.000) (8,100.00) PV of Cash Outflows (8,100.00) Cash Inflows 1.000 0.8696 3,300.000 2,869.57 Cash Inflows 2.000 0.7561 4,200.000 3,175.80 Cash Inflows 3.000 0.6575 5,400.000 3,550.59 Cash Inflows 4.000 0.5718 4,600.000 2,630.06 PV of Cash Inflows 12,226.0212 Time PV of Cash inflows Cumulative Cash Flows 1.00 2,869.57 2,869.5652 2.00 3,175.80 6,045.3686 3.00 3,550.59 9,595.9563 4.00 2,630.06 12,226.0212 Discounted PBP = 2 + (8100 - 6045)/3550.69 = 2.5787 Years Statement showing calculation of NPV Particulars Time PVF@15% Amount PV(Amount *PVF) Cash Outflows - 1.0000 (11,100.000) (11,100.00) PV of Cash Outflows (11,100.00) Cash Inflows 1.000 0.8696 3,300.000 2,869.57 Cash Inflows 2.000 0.7561 4,200.000 3,175.80 Cash Inflows 3.000 0.6575 5,400.000 3,550.59 Cash Inflows 4.000 0.5718 4,600.000 2,630.06 PV of Cash Inflows 12,226.0212 Time PV of Cash inflows Cumulative Cash Flows 1.00 2,869.57 2,869.5652 2.00 3,175.80 6,045.3686 3.00 3,550.59 9,595.9563 4.00 2,630.06 12,226.0212 Discounted PBP = 3 + (11100 - 9596)/2630 = 3.5719 Years
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