An investment project has annual cash inflows of $8,700, $8,200, $7,500, and $8,

Question

An investment project has annual cash inflows of $8,700, $8,200, $7,500, and $8,800, and a discount rate of 8 percent. If the initial cost is $9,100, the discounted payback period for these cash flows is _____

Please explain how you find the answer? I dont understand!

An investment project has annual cash inflows of $8,700, $8,200, $7,500, and $8,800, and a discount rate of 8 percent. If the initial cost is $9,100, the discounted payback period for these cash flows is _____

Please explain how you find the answer? I dont understand!

Explanation / Answer

Discounted in flows are : 8700/(1+8%)=8055.55;;8200/(1+8%)^2=7030.12;;7500/(1+8%)^3=5953.74;;

According to the above calculation investment will be back in 2 nd year;;

i.e 1 year 2 months ( means 8055.55 will be returned in frst year and the remaining(9100-8055.55=$1044) will be returned in first two months of second year(monthly return in second year is 7030.12/12=$585.84)

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