Rodriquez's Hot Rods is considering a new project with an initial cost of $54,780 and a discount rate of 14 percent.The project is expected to have cash inflows of $27,000 a year for 3 years.What is the discounted payback period?
A)2.17 years
B)2.11 years
C)2.62 years
D)2.57 years
E)Never

Question

Quizplus · Accepted Answer

Discounted Year 1 cash flow = $27,000 / 1.14 = $23,684.21 Discounted Year 2 cash flow = $27,000 / 1.14² = $20,775.62 Discounted Year 3 cash flow = $27,000 / 1.14³ = $18,224.23 Discounted payback period = 2 + ($54,780 - $23,684.21 - $20,775.62)/ $18,224.23 = 2.57 years

Rodriquez's Hot Rods Is Considering a New Project with an Initial