An investment project has annual cash inflows of $4,600, $3,700, $4,900, and $4,
ID: 2779183 • Letter: A
Question
An investment project has annual cash inflows of $4,600, $3,700, $4,900, and $4,100, for the next four years, respectively. The discount rate is 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,500? (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 $7,600? (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 $10,600? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period years
Explanation / Answer
Discounted PBP Time Amount PVf PV Cumulative - (5,500.00) 1.00 (5,500.00) (5,500.00) 1.00 4,600.00 0.88 4,070.80 (1,429.20) 2.00 3,700.00 0.78 2,897.64 1,468.44 3.00 4,900.00 0.69 3,395.95 4,864.38 4.00 4,100.00 0.61 2,514.61 7,378.99 PBP = 1 +1429.20/2897.64 PBP = 1.49 Years Discounted PBP Time Amount PVf PV Cumulative - (7,600.00) 1.00 (7,600.00) (7,600.00) 1.00 4,600.00 0.88 4,070.80 (3,529.20) 2.00 3,700.00 0.78 2,897.64 (631.56) 3.00 4,900.00 0.69 3,395.95 2,764.38 4.00 4,100.00 0.61 2,514.61 5,278.99 PBP = 2 + 631.56/3395.95 PBP = 2.19Years Discounted PBP Time Amount PVf PV Cumulative - (10,600.00) 1.00 (10,600.00) (10,600.00) 1.00 4,600.00 0.88 4,070.80 (6,529.20) 2.00 3,700.00 0.78 2,897.64 (3,631.56) 3.00 4,900.00 0.69 3,395.95 (235.62) 4.00 4,100.00 0.61 2,514.61 2,278.99 PBP = 3 + 235.62/2514.61 PBP = 3.09 Years
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