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Discounted payback period. Given the following two projects and their cash​ flows, LOADING...​, calculate the discounted payback period with a discount rate of ​%, ​%, and ​%. What do you notice about the payback period as the discount rate​ rises? Explain this relationship. With a discount rate of ​%, the cash outflow for project A​ is:

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jepessoa

Answer:

the numbers are missing, so I looked for a similar question:

Cash Flow                       A                B

Cost                        $10,000         $105,000

Cash flow year 1     $3,571            $21,000

Cash flow year 2     $3,571            $10,500

Cash flow year 3     $3,571            $42,000

Cash flow year 4     $3,571            $31,500

Cash flow year 5     $3,571            $5,250

Cash flow year 6     $3,571            $0

With a discount rate of 5​%, 10% & 15%

Discounted cash flows for project A:

                                                      5%                10%               15%

Cost                        $10,000        

Cash flow year 1     $3,571            $3,401        $3,246          $3,105

Cash flow year 2     $3,571           $3,239       $2,951           $2,700

Cash flow year 3     $3,571           $3,085       $2,683          $2,348

Cash flow year 4     $3,571           $2,938       $2,439          $2,042

Cash flow year 5     $3,571           $2,798       $2,217            $1,775

Cash flow year 6     $3,571           $2,665       $2,016           $1,544

discounted payback period:

5% = 3.09 years

10% = 3.46 years

15% = 3.9 years

The higher the discount rate, the longer the discounted payback period.

Discounted cash flows for project B:

                                                      5%                10%               15%

Cost                        $105,000        

Cash flow year 1     $21,000        $20,000     $19,091          $18,261

Cash flow year 2     $10,500       $9,524       $8,678           $7,940

Cash flow year 3     $42,000      $36,281      $31,555          $27,616

Cash flow year 4     $31,500        $25,915     $21,515           $18,010

Cash flow year 5     $5,250         $4,114         $3,260           $2,610

discounted payback period:

5% = more than 5 years, the project's NPV is negative -$9,166.37

10% = more than 5 years, the project's NPV is negative -$20,901.42

15% = more than 5 years, the project's NPV is negative -$30,563.54  

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