Finance Question: Discounted Cash Flows...

[aphex]

Im drawing a blank on how to do this and my book (writted by my professor SUCKS!)

Project A has the following cash flows:

Year 0: -300
Year 1: +100
Year 2: +150
Year 3: +200
Year 4: +50

Project A has a 10% cost of capital.

What is Project A's discounted payback?

 

[GTaudiophile]

D@MN, I should know this...

 

[GTaudiophile]

Are you given a Present Value?

 

[aphex]

the present value is what im trying to find for each of these...
each present value will be the discounted cash flow for that year

 

[GasX]

Using the excel formula: =NPV(0.1,100, 150, 200,50), you get: $399.29. Then subtract the 300 you spend in year zero.

$99.29

 

[GTaudiophile]

Thinks he's got it.

Sum of the discounted cash flows minus the net present value.

 

[aphex]

Well im doin this on my business calulator...

I just did something simular...

I found the formula CF/(1+k)t(raised)
Where: K=Cost of capital, t=year of CF

So in this problem:
100/(1+.10)1=90.91
150/(1+.10)2=123.97
200/(1+.10)3=150.26
50/(1+.10)4=34.15

Therefore the payback is met between years 2 and 3:
-300+90.91+123.97=85.12
150.26/85.12=.57
So .57 plus the 2 years previous...

2.57 is the answer... Thanks for the help guys, i appreciate it