Answer:
b. 1.86 years
Explanation:
The computation of the project's discounted payback is shown below:-
Year Cash Flows Discounted CFs (at 10%) Cumulative
Discounted CFs
0 -$100,000 -$100,000 -$100,000
1 $40,000 $36,363.64 -$63,636.36
2 $90,000 $74,380.17 $10,743.80
3 $30,000 $22,539.44 $33,283.25
4 $60,000 $40,980.81 $74,264.05
Discounted Payback Period = Years before full recovery +
(Uncovered Cost at start of the year ÷ Cash Flow during the year)
Now we will put the values into the formula
= 1 + ($63,636.36 ÷ $74,380.17)
= 1 + 0.86
= 1.86 years
