Shannon Co.is considering a project that has the following cash flow and cost of capital (r)data.What is the project's discounted payback?
R =
10)00%
Year
0
1
2
3
4
Cash flows
−$950
$525
$485
$445
$405
A) 1.61 years
B) 1.79 years
C) 1.99 years
D) 2.22 years
E) 2.44 years

Question

Quizplus · Accepted Answer

The discounted payback period is the time it takes for the present value of cash inflows to cover the initial investment. By discounting each cash flow at 10% and summing them, the cumulative present value becomes positive between years 2 and 3, specifically at 2.22 years.