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A project has an initial cost of $8,500 and produces cash inflows of $2,700, $5,000, and...

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Finance

A project has an initial cost of $8,500 and produces cashinflows of $2,700, $5,000, and $1,600 over the next three years,respectively. What is the discounted payback period if the requiredrate of return is 7 percent?

A) 2.30 years

B) 2.15 years

C) 2.91 years

D) never

E) 2.50 years

Answer & Explanation Solved by verified expert
3.8 Ratings (466 Votes)

Calculation of Discounted Payback period
Time Amount PVf PV Cumulative
                                                                                      -           (8,500.00)                      1.00                           (8,500.00)                           (8,500.00)
                                                                                 1.00           2,700.00                      0.93                              2,523.36                           (5,976.64)
                                                                                 2.00           5,000.00                      0.87                              4,367.19                           (1,609.44)
                                                                                 3.00           1,600.00                      0.82                              1,306.08                               (303.37)
From the above data, payback can never be calculated.
So correct answer is never.

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