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Discounted payback period. Given the following two projects and their cash flows, calculate the discounted payback period with a discount rate of 5%, 8%, and
Discounted payback period.
Given the following two projects and their cash flows, calculate the discounted payback period with a discount rate of 5%, 8%, and 20%.
What do you notice about the payback period as the discount rate rises? Explain this relationship.
Cash Flow | A | B |
| ||
Cost | $10,000 | $105,000 | |||
Cash flow year 1 | $4,000 | $31,500 | |||
Cash flow year 2 | $4,000 | $42,000 | |||
Cash flow year 3 | $4,000 | $10,500 | |||
Cash flow year 4 | $4,000 | $21,000 | |||
Cash flow year 5 | $4,000 | $21,000 | |||
Cash flow year 6 | $0004,000 | $0 |
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