Motor Sales is considering a project that costs $15,900 will produce cash inflows of $5,500 a year for 4 years.The project has a required rate of return of 11.25 percent.What is the discounted payback period?
A)3)70 years
B)3)91 years
C)3)82 years
D)3)64 years
E)Never

Question

Quizplus · Accepted Answer

Discounted Year 1 cash flow = $5,500 / 1.1125 = $4,943.82 Discounted Year 2 cash flow = $5,500 / 1.1125² = $4,443.88 Discounted Year 3 cash flow = $5,500 / 1.1125³ = $3,994.50 Discounted Year 4 cash flow = $5,500 / 1.1125⁴ = $3,590.56 Discounted payback period = 3 + ($15,900 - $4,943.82 - $4,443.88 - $3,994.50)/ $3,590.56 = 3.70 years

Motor Sales Is Considering a Project That Costs $15,900 Will