Question

An investment project costs $10,000 and has annual cash flows of $2,920 for six years. What is the discounted payback period if the discount rate is zero percent

Answer 1

It will take 4 years and 269 days to cover for the initial investment.

Step-by-step explanation:

Giving the following information:

An investment project costs $10,000 and has annual cash flows of $2,920 for six years.

The payback period is the time required for the cash flows to cover the initial investment.

Cf1= 2,920 - 10,000= -7,080

Cf2= 2,920 - 7,080= -4,160

Cf3= 2,920 - 4,160= -1,240

Cf4= 2,920 - 1,240= 1,680

To be more accurate:

(1,240/1,680)*365= 269

It will take 4 years and 269 days to cover for the initial investment.