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Discounted Payback Method
discounted payback method which is the time needed to pay back the original investment in terms of discounted future cash flows. Define the technique in detail.
- Discuss the difference between the two methods.
- Analyze the numbers in the problem using an excel spreadsheet.
- Use a 10% discount rate.
- You must use Excel formulas which are on the ribbon in Excel marked Fx to make your calculations whenever possible. Do not write your own formulas unless absolutely necessary.
- All information must be in Excel (Word documents will not be read and you will not get credit).
- Remember to carry out your answers at least two decimal places.
- Add a new tab on your original excel file and submit this project
HW
| Group 4 – Kerstin Robinson Knecht | |||||||||||||||||||||||
| BUS 660 – Professor Shepard | |||||||||||||||||||||||
| 19-Feb-21 | |||||||||||||||||||||||
| Capital Investment – Payback Method | |||||||||||||||||||||||
| Year | Project A | accumulated cash flow | Breakeven Point: between year | 3 | # of full years with negative cash flow | # of partial years with negative cash flow | Payback Time in years | ||||||||||||||||
| 2018 | year 0 | ( | $3,000,000 | ($3,000,000) | still unpaid | ||||||||||||||||||
| 2019 | year 1 | $0 | 0.4 | 3.40 | |||||||||||||||||||
| 2020 | year 2 | $900,000 | ($2,100,000) | ||||||||||||||||||||
| 2021 | year 3 | ($1,200,000) | |||||||||||||||||||||
| 2022 | year 4 | $1,800,000 | 0.400 | ||||||||||||||||||||
| Project B | Breakeven Point: between year 3 & 4 | ||||||||||||||||||||||
| $975,000 | ($2,025,000) | 0.075 | 3.08 | ||||||||||||||||||||
| ($1,050,000) | |||||||||||||||||||||||
| ($75,000) | |||||||||||||||||||||||
| $1,000,000 | $925,000 | ||||||||||||||||||||||
| Project C | |||||||||||||||||||||||
| ($3,100,000) | |||||||||||||||||||||||
| $985,000 | ($2,115,000) | 0.2 | 3.20 | ||||||||||||||||||||
| ($1,190,000) | |||||||||||||||||||||||
| ($190,000) | |||||||||||||||||||||||
| $950,000 | $760,000 | 0.200 |