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A specialized automatic machine costs $100,000 and is expected to save $19,700 per year while in...

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Finance

A specialized automatic machine costs $100,000 and is expectedto save $19,700 per year while in operation. Using a 5 % interestrate, what is the discounted payback period (in years).

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3.7 Ratings (317 Votes)

Ans 6 years

Year Project Cash Flows (i) DF@ 11% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -100000 1                       (1,00,000.00)          (1,00,000.00)
1 19700 0.952                            18,761.90              (81,238.10)
2 19700 0.907                            17,868.48              (63,369.61)
3 19700 0.864                            17,017.60              (46,352.01)
4 19700 0.823                            16,207.24              (30,144.78)
5 19700 0.784                            15,435.47              (14,709.31)
6 19700 0.746                            14,700.44                        (8.87)
7 19700 0.711                            14,000.42               13,991.56
8 19700 0.677                            13,333.74               27,325.29
NPV                            27,325.29
Discounted Payback Period = 6 years + 8.87/14000.42
6.00 years

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A specialized automatic machine costs $100,000 and is expectedto save $19,700 per year while in operation. Using a 5 % interestrate, what is the discounted payback period (in years).

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