Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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**Investment Project Cash Flow Analysis**

An investment project has annual cash inflows of $4,100, $5,000, $6,200, and $5,400 for the next four years, respectively. The discount rate is 14 percent.

**Questions:**

**a.** What is the discounted payback period for these cash flows if the initial cost is $6,800?  
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)*

**b.** What is the discounted payback period for these cash flows if the initial cost is $8,900?  
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)*

**c.** What is the discounted payback period for these cash flows if the initial cost is $11,900?  
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)*

**Conclusion Table:**

|   | Discounted Payback Period |
|---|---------------------------|
| a. | \_\_\_\_\_\_\_\_\_\_ years      |
| b. | \_\_\_\_\_\_\_\_\_\_ years      |
| c. | \_\_\_\_\_\_\_\_\_\_ years      |

**Instructions for Calculations:**

1. Calculate the present value of each cash inflow using the given discount rate.
2. Sum these discounted cash inflows until the total equals or exceeds the initial investment cost.
3. Determine the year in which the cumulative discounted cash inflows equal the initial investment; this is the discounted payback period.
4. Provide the final result rounded to two decimal places.
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Transcribed Image Text:**Investment Project Cash Flow Analysis** An investment project has annual cash inflows of $4,100, $5,000, $6,200, and $5,400 for the next four years, respectively. The discount rate is 14 percent. **Questions:** **a.** What is the discounted payback period for these cash flows if the initial cost is $6,800? *(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)* **b.** What is the discounted payback period for these cash flows if the initial cost is $8,900? *(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)* **c.** What is the discounted payback period for these cash flows if the initial cost is $11,900? *(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)* **Conclusion Table:** | | Discounted Payback Period | |---|---------------------------| | a. | \_\_\_\_\_\_\_\_\_\_ years | | b. | \_\_\_\_\_\_\_\_\_\_ years | | c. | \_\_\_\_\_\_\_\_\_\_ years | **Instructions for Calculations:** 1. Calculate the present value of each cash inflow using the given discount rate. 2. Sum these discounted cash inflows until the total equals or exceeds the initial investment cost. 3. Determine the year in which the cumulative discounted cash inflows equal the initial investment; this is the discounted payback period. 4. Provide the final result rounded to two decimal places.
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