2. value: points 12.50 Problem 9-5 Calculating Discounted Payback [LO3] An inves
ID: 2778864 • Letter: 2
Question
2. value: points 12.50 Problem 9-5 Calculating Discounted Payback [LO3] An investment project costs $10,000 and has annual cash flows of $2,880 for six years. What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period years 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.) Discounted payback period years What is the discounted payback period if the discount rate is 19 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period yearsExplanation / Answer
Statement showing DiscountedPayback period Time PVF @0% Cash flows PV of Cash Flows Cumulative Cash flows - 1.00 (10,000.00) (10,000.00) (10,000.00) 1.00 1.00 2,880.00 2,880.00 (7,120.00) 2.00 1.00 2,880.00 2,880.00 (4,240.00) 3.00 1.00 2,880.00 2,880.00 (1,360.00) 4.00 1.00 2,880.00 2,880.00 1,520.00 5.00 1.00 2,880.00 2,880.00 4,400.00 6.00 1.00 2,880.00 2,880.00 7,280.00 Discounted Payback period = 3 + 1360/2880 Discounted Payback period = 3.47 Years Statement showing DiscountedPayback period Time PVF @5% Cash flows PV of Cash Flows Cumulative Cash flows - 1.00 (10,000.00) (10,000.00) (10,000.00) 1.00 0.95 2,880.00 2,742.86 (7,257.14) 2.00 0.91 2,880.00 2,612.24 (4,644.90) 3.00 0.86 2,880.00 2,487.85 (2,157.05) 4.00 0.82 2,880.00 2,369.38 212.34 5.00 0.78 2,880.00 2,256.56 2,468.89 6.00 0.75 2,880.00 2,149.10 4,617.99 Discounted Payback period = 3 + 2157.05/2369.38 Discounted Payback period = 3.91 Years Statement showing DiscountedPayback period Time PVF @19% Cash flows PV of Cash Flows Cumulative Cash flows - 1.00 (10,000.00) (10,000.00) (10,000.00) 1.00 0.84 2,880.00 2,420.17 (7,579.83) 2.00 0.71 2,880.00 2,033.75 (5,546.08) 3.00 0.59 2,880.00 1,709.04 (3,837.04) 4.00 0.50 2,880.00 1,436.17 (2,400.87) 5.00 0.42 2,880.00 1,206.86 (1,194.01) 6.00 0.35 2,880.00 1,014.17 (179.84) No discounted PBP since cash outflows will not be recovdered during life of project
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