Corporate Finance Q46
0. The project has the following annual cash flows:
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| - 85,540 | $42,100 | $23,025 | $30,200 | $16,000 |
With a discount rate of 7%, the discounted payback period (in years) is closest to:
- Option : B
- Explanation :
Year Cash flow Discounted cash flow[ CFn / (1.07)^n ] Cumulative discountedcash flow:[CF0 – Cumulative PVcash flows] 0 -85,540 -85,540 -85,540 1 42,100 39,346 -46,194 2 23,025 20,111 -26,083 3 30,200 24,652 -1,431 4 16,000 12,206 The discounted payback is 3.1 years: [ 3 + (1,431 / 12,206) ].
