For the following example use -1,000 as the initial investment, which is negative because its a cash outflow, and 600 and 800 as the first and second years cash flows, respectively.

Using a Financial Calculator to rebates on chevy traverse 2015 Determine Payback Period You can determine the payback the voice finalists 2014 period with a minimum of actual calculation by using one of the many recommended financial calculators available at most office supply stores.50000 Years(n) 8 Rate(i) 11 CF 10000.Discount the Annual Cash Flows, step 1, determine a projects initial required investment, annual cash flows and discount rate, which is the rate you could earn on a similar investment.Assuming the rate is 10, the present value of the first cash flow would be 909.09, which is 1,000 divided.The calculation for discounted payback period using this example is the following.(See References 3, A variant: Discounted payback).Alternative Discounted Payback Period Formula, the formula listed at the top of the page assumes that each cash flow is equal.Imagine that a company wants to invest in a project costing 10,000 and expects to generate cash flows of 5,000 in year 1, 4,000 in year 2, and 3,000 in year.Calculation of Discounted Payback Period, the calculation for discounted payback period is a bit different than the calculation for regular payback period because the cash flows used in the calculation are discounted by the weighted average cost of capital used as the interest rate and.This results in 600 divided.10, which equals 545.45.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.Step 4, add the whole number of years required to pay back the initial investment to the portion of the final year required to pay back the initial investment, to determine the discounted payback period.That said, this third flaw of the discounted payback period can be dismissed if the weighted average cost of capital is used as the rate at which to discount the cash flows.This equals -454.55, which is the cumulative, or total, cash flow after year.This flaw overstates the time to recover the initial investment.Assuming the company uses a discount rate of 10, the discounted payback period for this example would be calculated based on the following equation: The equation for this example would be reduced to: which results in a discounted payback period.273.Here are the steps you use to calculate discounted payback period:.Step 2, add the second years discounted cash flow to the cumulative cash flow after year.Here is an example of a discounted cash flow : Imagine that the first year's cash flow from a project is 400 and the weighted average cost of capital.

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