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A project has an initial cost of $18,400 and produces cash inflows of $7,200, $8,900, and $7,500 over three years, respectively. What is the discounted payback period if the required rate of return is 16 percent

Respuesta :

Answer:

Never. the amount invested is never recovered

Explanation:

Discounted payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative discounted cash flows

Discounted cash flow in year 1 = 7200 / 1.16 = $6206.90

Discounted cash flow in year 2 = $8,900 / 1.16² = $6614.15

Discounted cash flow in year 3 = $7,500 / 1.16³ = $4804.93

Adding the discounted cash flows together gives a value of $17,625.98. This value is less than the cost of the project. So, the amount invested is never recovered

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