Problem:

An investment project has annual cash inflows of $5,200, $6,300, $7,100, and $8,400, and a discount rate of 19 percent. What is the discounted payback period for these cash flows if the initial cost is $8,000? Is it 1.82 years, 0.82 years, 3.64 years, 1.32 years or 2.57 years?

Required:

What if the investment project provides cash inflows of $720 per year for eight years. What is the project payback period if the initial cost is $1,925? What if the initial cost is $3,750? What if it is $5,800?

Note: Explain all steps comprehensively.