Discounted Payback period

This topic has 3 replies, 2 voices, and was last updated 9 years ago by secondstar.

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March 3, 2017 at 4:04 pm #375327
Yong
Participant
- Topics: 17
- Replies: 15
Investment 450K

Cash Discounted Disc Cash flow 10% Cash Flow CumulativeCash flow
Investment 450 1 450 (450.00)
Year 1 130 0.909 118.17 (331.83)
Year 2 130 0.826 107.38 (224.45)
Year 3 130 0.751 97.63 (126.82)
Year 4 130 0.683 88.79 (38.03)
Year 5 150 0.621 93.15 55.12

The answer is 4 year 5 months.

However, based on my calculation 38.03/150 x 12 mths is 3 months.

Can please advise, why it is 5 months instead of 3 months.

Thank you.
March 3, 2017 at 4:28 pm #375330
secondstar
Member
- Topics: 16
- Replies: 220
Why are you dividing it with 150?
Thats the non-discounted profit received. You should be using its discounted amount i.e 93.15.

(38.03/93.15) x 12 = 4.899 or 5 months.

Hope it helped you.
March 4, 2017 at 2:43 pm #375542
Yong
Participant
- Topics: 17
- Replies: 15
Hi Secondstar

Appreciate, thank you.
March 5, 2017 at 8:30 am #375652
secondstar
Member
- Topics: 16
- Replies: 220
@clalim2205 said:
Hi Secondstar

Appreciate, thank you.

You are welcome 🙂
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