Chapter 11, Problem 5P

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Chapter
Section

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

DISCOUNTED PAYBACK Refer to Problem 11-1. What is the project’s discounted payback?

Summary Introduction

To calculate: The discounted payback period for the given project.

Discounted Payback Period:

It refers to the time period that a project takes to repay the amount invested with some returns attached to it after considering the time value of money or discounted cash flows.

Explanation

Given,

Cost of the project is $52,125. Life of project is 8 years. Cash inflow from project per year is$12,000.

Cost of capital of the project is 12%.

The formula to calculate the discounted payback period is,

(DicountedPaybackPeriod)=(YearofLastNegativeCumulativePresentValue)+|LastNegativeCumulativePresentValue|(PositivePresentValue

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