The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4,$35,000 per year in Years 5 through 9,and $40,000 in Year 10.This investment will cost the firm $150,000 today,and the firm's cost of capital is 10%.Assume cash flows occur evenly during the year,1/365th each day.What is the discounted payback period for this investment?

Question

Quizplus · Accepted Answer

The discounted payback period is the time it takes for the present value of cash flows to cover the initial investment. By discounting each cash flow at 10% and summing them, the investment is recovered in approximately 4.86 years.

The Seattle Corporation Has Been Presented with an Investment Opportunity