Clinton is considering a project that costs $3,200 will produce cash inflows of $980 a year for 4 years.The project has a required rate of return of 8.75 percent.What is the discounted payback period?
A)3.01 years
B)3.18 years
C)3.82 years
D)4.18 years
E)Never

Question

Quizplus · Accepted Answer

Discounted cash flows:Year 1 = $980/1.0875 = $901.15Year 2 = $980/1.0875² = $828.64Year 3 = $980/1.0875³ = $761.97Year 4 = $980/1.0875⁴ = $700.66Total discounted cash flows = $901.15 + 828.64 + 761.97 + 700.66 = $3,192.42The project never pays back on a discounted basis.

Clinton Is Considering a Project That Costs $3,200 Will Produce