What is the discounted payback period-nominal payback period

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Reference no: EM131049363

You work for a small, local telecommunications company. In five years, the company plans to undertake a major upgrade to its servers and other IT infrastructure. Management estimates that it will need up to $450,000 to cover all related costs; however, as a fairly young company, the goal is to pay for the upgrade with cash and not to take out loans. Right now, you have $300,000 in a bank account established for Capital Investments. This account pays 6% interest, compounded annually. A member of the finance department has approached you with an investment opportunity for the $300,000 that covers a five-year period and has the following projected after-tax cash flows:

Year Projected Cash Flow

1 $94,000

2 $114,000

3 $134,000

4 $114,000 5 $94,000

Based on this information, answer the following questions:

2) If you undertake the investment opportunity, what is the Nominal Payback Period?

3) Using the factors for 6%, what is the Discounted Payback Period?

Reference no: EM131049363

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