5 nswered ut of 1.00 They BOTH have the same Annual Cash Flow (INOUT), Why does

Question

5 nswered ut of 1.00 They BOTH have the same Annual Cash Flow (INOUT), Why does the Discounted method break even almost ONE the Discounted methods D NOT include the the Discounted methods includes the "tme value of money the Conventional method includes the "time value of money -$105,000+$20,000 $15,000 $25,000 $35,000 $45,000 $45,000 $35,000 -$85,000 -$70,000 $45,000 -$10,000 $35,000 $80,000 $115,000 Ending Cash Balance (15%)" -$85,000 15,000 -$85,000(0.15)--$12,750 25,000-$82,750(0.15)-12,413 35,000-$70,163(0.15)--10,524 45,000-$45,687(0.15)=-6,853 -70,163 -7,540 36,329 76,778

Explanation / Answer

In payback period it calculates the time project will take to return its initial investment

In discounted payback method it calculates the time project will take to return its initial investment by diconting the future cash flows rather than direct cash flows

In the above case Break even is one year later when using discounted method because it is considering the time value of money

So the answer is ' the Discounted methods includes the "time value of money" '

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