An investment project costs $10,000 and has annual cash flows of $2,990 for six

Question

An investment project costs $10,000 and has annual cash flows of $2,990 for six years.

What is the discounted payback period if the discount rate is zero percent?

What is the discounted payback period if the discount rate is 5 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period if the discount rate is 20 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period if the discount rate is zero percent?

Explanation / Answer

a. Pay back Period = 3.34year

b. Discounted Payback periodif the discount rate is 5 percent= 3.76 year

c. Discounted Payback periodif the discount rate is 20 percent= more than 6. year

As cash flow will generate for 6year therefore the project will not be viable as Discounted payment recieved within this cashflow period

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