Question

A $218,000 project has equal annual cash flows over its 7-year life. If the discounted payback period is seven years and the discount rate is 0%, what is the amount of the cash flow in each of the seven years

Answer 1

$31,142.86

Step-by-step explanation:

Data provided in the question

Initial investment = $218,000

Time period = 7 years

Discount rate = 0%

As we know that

Discounted Payback period = Initial investment ÷ Annual cash flows

So, the amount of the cash flow for each of the seven years is

= $218,000 ÷ 7 years

= $31,142.86

By dividing the initial investment by the discounted payback period we can get the annual year cash flows