Given the following cash flows for a capital project, calculate its payback period and discounted payback period. The required rate of return is 8 percent.
Year 0 1 2 3 4 5
Cash flow ?50,000 15,000 15,000 20,000 10,000 5,000
The discounted payback period is:
a. 0.16 years longer than the payback period.
b. 0.51 years longer than the payback period.
c. 1.01 years longer than the payback period.
Answer: c. 1.01 years longer than the payback period.
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LEE Corporation intends to purchase equipment for $1,500,000. The equipment has a 5-year useful life and will
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