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## What is discounted payback period with example?

Example of the Discounted Payback Period

The project is expected to return $1,000 each period for the next five periods, and the appropriate discount rate is 4%. The discounted payback period calculation begins with the -$3,000 cash outlay in the starting period. The first period will experience a +$1,000 cash inflow.

## How do I calculate payback period in Excel with cash flows?

Enter the initial investment in the Time Zero column/Initial Outlay row. Enter after-tax cash flows (CF) for each year in the Year column/After-Tax Cash Flow row. Calculate cumulative cash flows (CCC) for each year and enter the result in the Year X column/Cumulative Cash Flows row.

## How do you calculate discounted cash flows?

Here is the DCF formula:

- CF = Cash Flow in the Period.
- r = the interest rate or discount rate.
- n = the period number.
- If you pay less than the DCF value, your rate of return will be higher than the discount rate.
- If you pay more than the DCF value, your rate of return will be lower than the discount.

## What is the discounted payback method designed to compute quizlet?

Thus discounted payback provides a measure of financial/economic break-even because of this discounting, just as regular payback provides a measure of accounting break-even because it does not discount the cash flows.

## How is discount factor calculated?

For example, to calculate discount factor for a cash flow one year in the future, you could simply divide 1 by the interest rate plus 1. For an interest rate of 5%, the discount factor would be 1 divided by 1.05, or 95%.