The discounted payback period of Project Alpha is between 3 and 4 years. Workings
Project Alpha
??????????????? Year??????????????????? Cash flow??????????????? ??Discount factor?????????????? ?PV????????????? ???? ? Cum. PV
???????????????? ?????????????????????????????? $?????????????????????????????? ? 10%?????????????????????????? ?$????????????????? ?????????? $
????????????????? 0?????????????????????? (800,000)?????????????????????? 1.000???????????????????? ?(800,000)?????????? ???? (800,000)
????????????????? 1?????????????????????? 250,000???????????????????????? ?0.909????????????????????? 227,250???????????????? ?(572,750)
??????????????????2?????????????????????? 250,000??????????????????????? ?0.826?????????????????????? 206,500????????????????? (366,250)
?????????????????3??????? ??????????????? 400,000??????????????????????? ?0.751??????????????????????? 300,400?????????????????(65,850)
???????????????? 4??????????????????????? 300,000??????????????????????? ?0.683????????????????? ???? ?204,900???????????????? 139,050
?????????????? ? 5????????????????????????200,000???????????????????????? 0.621?????????????????????? 124,200?????????????????? 263,250
??????????? ???? 6????????????????? ????? 50,000????????????????????????? ?0.564????????????????????? ? 28,200??????????????????? 291,450
The discounted payback period is therefore between three and four years.