Answer:
A. What is the discounted payback period for these cash flows if the initial cost is $5,500?
$5,500 - $4,070.80 = $1,429.20
$1,429.20 / $2,897.64 = 0.49
discounted payback period = 1.49 years
B. What is the discounted payback period for these cash flows if the initial cost is $7,600?
$7,600 - $4,070.80 - $2,897.64 = $631.56
$631.56 / $3,395.95 = 0.19
discounted payback period = 2.19 years
C. What is the discounted payback period for these cash flows if the initial cost is $10,600?
$10,600 - $4,070.80 - $2,897.64 - $3,395.95 = $235.61
$235.61 / $2,514.61 = 0.09
discounted payback period = 3.09 years
Explanation:
year annual cash flows discounted cash flows
1 $4,600 = $4,600/1.13 = $4,070.80
2 $3,700 = $3,700/1.13² = $2,897.64
3 $4,900 = $4,900/1.13³ = $3,395.95
4 $4,100 = $4,100/1.13⁴ = $2,514.61
