Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The machinery will result in additional annual cash flows of $375,000 over the next five years. The firm's cost of capital is 10 percent. What is the discounted payback period for this project? If its acceptance period is three years, will this project be accepted? (Do not round intermediate computations. Round your answer to one decimal place.)

Question

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The discounted payback period is the time it takes for the present value of cash flows to cover the initial investment. Calculating the present value of cash flows at a 10% discount rate, it takes 4.3 years to recover the $1,250,000 investment. Since the acceptance period is three years, the project will not be accepted.