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Hello John,
I hope you are doing well.
I followed the lecture with the notes in front of me, but I didn’t get what’s a bit.
When you calculate the Discounted payback period you do this calculation:
(100,000-73,000)/34150
I know what are the amounts, but I don’t understand the logic behind.
Thank you for help.
Cheers
We need to get back 100,000.
After 3 years we have got back 73,000, so we need an extra 27,000.
The fourth year gives 34,150, so to get back 27,000 will only take part of the 4th year.
The proportion of the 4th year is 27,000 / 34,150 (or 0.79 of a year) 🙂
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