What is the discounted payback of a project that has an initial outlay of $20,000 and will generate $6,000 in year 1, $12,000 in year 2, $9,000 in year 3, and $14,000 in year 4 assuming the cost of capital is 10%?

2.68 years

Explanation:

Year     Inflows   Discount rate 10% PV of cash inflows Cumulative value

1         $6,000    0.9090909091    $5,454.55                    $5,454.55

2       $12000   0.826446281          $9,917.36                     $15,371.90

3      $9,000   0.7513148009   $6,761.83                    $22,133.73

4      $14,000   0.6830134554  $9,562.19                    $31,695.92

Total present value           $31,695.92

Now the discounted payback period is

= 2 + ($20,000 - $15,371.90) ÷ ($6761.83)

= 2 + 0.68 years

= 2.68 years

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%