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Discounted Payback Period (Solution)

The document outlines the calculation of the discounted payback period using a discount rate of 8.50%. The discounted payback period is determined to be 3.41 years, with a cumulative cash flow of $7 preceding the break-even point. It includes a breakdown of cash flows and their discounted values over a five-year period.

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21 views3 pages

Discounted Payback Period (Solution)

The document outlines the calculation of the discounted payback period using a discount rate of 8.50%. The discounted payback period is determined to be 3.41 years, with a cumulative cash flow of $7 preceding the break-even point. It includes a breakdown of cash flows and their discounted values over a five-year period.

Uploaded by

twinkleshergill12
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Discounted Payback Period

Task: Calculate the discouted payback period

Discount Rate
8.50%

Year Cash Flow Discounted Cash Flow


0 ($150) ($150)
1 $70 $65
2 $55 $47
3 $40 $31
4 $25 $18
5 $10 $7

Discounted Payback Period


(years) 3.41

Cash Flow in Payback Completion


Year 18
Cumulative cash flow preceding break-
even point 7

Payback Period: Expected vs. Cumulative Cash Flows


$100

$65
$47
$50
$31
$18 $17
$11 $7
$0
($7)
Discounted Cash Flow
Cumulative Discounted Cash Flow
($50) ($39)

($85)
($100)

($150)
($150)($150)

($200)
Cumulative Discounted
Cash Flow
($150) =C9/((1+$B$6)^B9) =SUM($D$9:D9)
($85) =C10/((1+$B$6)^B10) =SUM($D$9:D10)
($39) =C11/((1+$B$6)^B11) =SUM($D$9:D11)
($7) =C12/((1+$B$6)^B12) =SUM($D$9:D12)
$11 =C13/((1+$B$6)^B13) =SUM($D$9:D13)
$17 =C14/((1+$B$6)^B14) =SUM($D$9:D14)

=COUNTIFS(E10:E14,"<"&0)+D20/D19

=INDEX(D10:D14,MATCH(0,E10:E14,1)+1)

=ABS(INDEX(E10:E14,MATCH(0,E10:E14,1)))

e Cash Flows

$17

Discounted Cash Flow


Cumulative Discounted Cash Flow

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