An investment project has an initial cost of $260 and cash flows $75, $105, $100, and $50 for Years 1 to 4, respectively. The cost of capital is 12 percent. What is the discounted payback period? 3.76 years never 3.42 years 3.68 years 3.92 years

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Explanation:

Year  Cash flows  Present value at 12%  Cumulative Cash flows

0              (260)                   (260)                           (260)

1                  75                    66.96                         (193.04)

2               105                     83.71                          (109.33)

3               100                      71.18                           (38.15)

4                50                      31.78                          (6.37)(Approx).

therefore: the 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).

never

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