If a project costs $100 comma 000100,000 and is expected to return $27 comma 00027,000 annually, how long does it take to recover the initial investment? what would be the discounted payback period at iequals=1212 %? assume that the cash flows occur continuously throughout the year.

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Freedom

Business

23 July, 18:30

If a project costs $100 comma 000100,000 and is expected to return $27 comma 00027,000 annually, how long does it take to recover the initial investment? what would be the discounted payback period at iequals=1212 %? assume that the cash flows occur continuously throughout the year.

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Gordon Flowers · Answer 1

The formula for discounted payback period is DPP = - ln (1 - Id/C) / ln (1+d), wherein I is the initial investment, d is the discount rate, and C is the cash flow. Substituting values, DPP = - ln (1 - ((0.12) ($100) / $27)) / ln (1+0.12). Therefore, DDP is equal to 5.19 years.