Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project C
Time: 0 1 2 3 4 5
Cash flow: −$2,200 $960 $840 $880 $540 $340
Discounted payback period is the time in which initial investment comes back as cash inflow.
Discounted Cash Flow in Year 1 = 960/(1.08) = $888.89
Discounted Cash Flow in Year 2 = 840/(1.08)2 = $805.90
Discounted Cash Flow in Year 3 = 880/(1.08)3 = $698.57
Discounted Cash Flow in Year 4 = 540/(1.08)4 = $396.92
Discounted Payback period = 1(888.89) + 1(805.90) + 0.72(505.21/698.57)
Discounted Payback Period = 2.72 years
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8...
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