Question

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.

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.