Consider the following project: Initial outlay = $5 million Year 1 expected cash flow = $3 million Year 2 expected cash flow = $3 million Year 3 expected cash flow = $5 million Cost of capital = 8% If the cash flows are received uniformly throughout the year, the discounted payback period for this project is closest to: A. 1.67 years B. 1.86 years C. 2.01 years D. 2.32 years E. 3.00 years
Added by Kara L.
Step 1
08)^1 = $2.7778 million Year 2 discounted cash flow = $3 million / (1 + 0.08)^2 = $2.5720 million Year 3 discounted cash flow = $5 million / (1 + 0.08)^3 = $4.1116 million Show more…
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