Question

Discounted Payback period is the period in which initial investment is recovred after considering the time value of money.

 Year Opening Bal CF PVF @9% Disc CF Closing Bal 1 \$ 18,00,00,000.00 \$ 8,00,00,000.00 0.9174 \$ 7,33,94,495.41 \$ 10,66,05,504.59 2 \$ 10,66,05,504.59 \$ 7,50,00,000.00 0.8417 \$ 6,31,25,999.49 \$   4,34,79,505.09 3 \$   4,34,79,505.09 \$ 9,50,00,000.00 0.7722 \$ 7,33,57,430.61 \$ -2,98,77,925.51 4 \$ -2,98,77,925.51 \$ 9,00,00,000.00 0.7084 \$ 6,37,58,269.00 \$ -9,36,36,194.51

Disc PBP = Year in which least +ve CB + [ CB in that Year / Disc CF in Next year ]

= 2 + [ 43479505.09 / 73357430.61 ]

= 2 + 0.59

= 2.59 Years.

Discounted Payback period is 2.59 Years.

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