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25 April, 05:03

An investment project has an initial cost of $260 and cash flows $75, $105, $100, and $50 for Years 1 to 4, respectively. The cost of capital is 12 percent. What is the discounted payback period

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  1. 25 April, 05:40
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    It will take 2 years and 292 days.

    Explanation:

    Giving the following information:

    An investment project has an initial cost of $260 and cash flows $75, $105, $100, and $50 for Years 1 to 4.

    The payback method of project analysis calculates the time necessary for a series of cash flows to "payback" the initial investment.

    Io = - 260

    Year 1 = 75 = - 185

    Year 2 = 105 = - 80

    Year 3 = 100 = 20

    To calculate the number of days:

    Days = (80/100) * 365 = 292

    It will take 2 years and 292 days.
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