Answers to Assignment No. 6 Chapter 7- Questions and Problems: Answer to Q 13 Project at 2 percent discount rate YearCash Flow ($)Discounted Cash Flow ($) @ 2 percentCumulative Discounted Cash Flow ($)0-3000-3000-30001800784-22162800768.8-1447.23800753.6-693.64800739.245.65800724.8770.46800710.41480.8NPV=1480.8Since the discounted cash flows become positive by Year 4, the project pays back sometime in the fourth year. Note that out of the total discounted cash flow of $739.20 in Year 4, the first $693.60 comes in by 693.60/739.20 = 0.94 year. Therefore, the discounted payback for the project is 3.94 years, and thus the project should be pursued. Project at 12 percent discount rate YearCash Flow ($)Discounted Cash Flow ($) @ 12 percentCumulative Discounted Cash Flow ($)0-3000-3000-30001800714.4 -2285.62800637.6-1648.03800569.6-1078.4
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