N investment project costs $10,000 and has annual cash flows of $2,940 for six years. what is the discounted payback period if the discount rate is 0 percent?

Question

Yuliana Solomon

Business

10 May, 20:22

N investment project costs $10,000 and has annual cash flows of $2,940 for six years. what is the discounted payback period if the discount rate is 0 percent?

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Answers (1)

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Ruth Pittman · Answer 1

Is this what you're asking?

given PW = AW * (((1+i) ^n - 1) : (i * (1+i) ^n))

where we're finding i

and we know

PW = $10000

AW = $2940

n = 6

because we get i = 0.190981

and using that we find FW in

FW = - PW * (1+i) ^n + AW * (((1+i) ^n - 1) : i)

where

PW = $10000

AW = $2940

n = 6

we get FW = $0.03 approx $0

where i = 0, n is infinity ... just look at the equations. if there is a discount rate of 0%, the discounted payback period is infinite