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(Discounted payback period) Gios Restaurants is considering a project with the following expected cash flows: Year Project C
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Answer #1
Year Cash flows Present value@11% Cumulative Cash flows
0 (210) (210) (210)
1 85 76.58 (133.42)
2 75 60.87 (72.55)
3 85 62.15 (10.4)
4 105 69.17 58.77(Approx).

Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=3+(10.4/69.17)

=3.15 years(Approx).

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