Question

g using these data, calculate the following for both process 1 and process 2: (for parts c and d, use a 6.75% discount rate) a) payback period (pbp) b) rate of return on investment (roroi) c) discounted payback period (dpbp) d) net present value (npv) e) discounted cash flow rate of return (dcfror)

Answer 1

Discounted Payback Period (DPP) = A + (B / C) Where, A - Last period with a negative discounted cumulative cash flow B - Absolute value of discounted cumulative cash flow at the end of the period A C - Discounted cash flow during the period after A.

How does this occur?

• The net cash flows that will occur during each year of the project must first be discounted (i.e., brought to the present value). The discounted payback period is then obtained by deducting the discounted cash flows from the initial cost amount.
• The fundamental approach to calculating the discounted payback time is to discount the projected future cash flows of a project to its present value. Comparable to the original capital expenditure for the investment

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