Yancy is considering a project which will produce cash inflows of $900 a year for 4 years. The project has a 9 % required rate of return and an initial cost of $2,800. What is the discounted payback period?
A) 3.11 years
B) 3.18 years
C) 3.82 years
D) 4.18 years
E) never

Question

Quizplus · Accepted Answer

The discounted payback period is the time it takes for the present value of cash inflows to cover the initial investment. Calculating the present value of each cash inflow using the formula PV = Cash Inflow / (1 + r)^n, where r is the discount rate (9%), and summing these until they equal or exceed the initial cost of $2,800, results in a discounted payback period of approximately 3.82 years.

Yancy Is Considering a Project Which Will Produce Cash Inflows