Janice is considering an investment costing $102,500 with cash flows of $9,800 in Year 2,$48,700 in Year 3,and $82,900 in Year 4.The discount rate is 9 percent and the required discounted payback period is 2.5 years.Should this project be accepted or rejected? What is the discounted payback period?
A)Accepted;2.82 years
B)Accepted;3.96 years
C)Accepted;3.09 years
D)Rejected;2.82 years
E)Rejected;3.96 years

Question

Quizplus · Accepted Answer

Discounted cash flows:Year 1 = $0Year 2 = $9,800/1.09² = $8,248.46Year 3 = $48,700/1.09³ = $37,605.34Year 4 = $82,900/1.09⁴ = $58,728.45Discounted payback period = 3 + ($102,500 - 8,248.46 - 37,605.34)/$58,728.45 = 3.96 years

Janice Is Considering an Investment Costing $102,500 with Cash Flows