A project has an initial cost of $12,300 and produces cash inflows of $5,200,$5,300,and $4,800 over Years 1 to 3,respectively.What is the discounted payback period if the required rate of return is 12 percent?
A)2.13 years
B)2.34 years
C)2.78 years
D)2.91 years
E)Never

Question

Quizplus · Accepted Answer

Discounted Year 1 cash flow = $5,200 / 1.12 = $4,642.86 Discounted Year 2 cash flow = $5,300 / 1.12² = $4,225.13 Discounted Year 3 cash flow = $4,800 / 1.12³ = $3,416.55 Total discounted cash flows Years 1 to 3 = $4,642.86 + $4,225.13 + $3,416.55 = $12,284.54 The project never pays back on a discounted basis.

A Project Has an Initial Cost of $12,300 and Produces