Calculate the discounted payback period for this project

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Reference no: EM133372365

Question: A company is considering a potential investment project that requires an initial investment of $12,800 now, but that is expected to generate free cash flows of $2,300, $3,400 and $4,800 over the next three years. Assume an appropriate discount rate is 9%.

(Include enough working to show you understand the calculations.)

(a) Calculate the discounted payback period (DPBP) for this project.

(b) Say company management require a payback period of 3 years. Should the project be accepted or rejected? Explain your answer.

(c) Without doing any calculations, if you used non-discounted cash flows in your payback calculation, would you be more likely to accept or reject the project? Explain your answer.

Reference no: EM133372365

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