Discounted Payback Period Template

Prepared by Dheeraj Vaidya, CFA, FRM

dheeraj@wallstreetmojo.com

visit - www.wallstreetmojo.com
Funny Inc. would like to invest $150,000 into a project as initial investment.
The firm expects to generate $70,000 in the first year, $60,000 in the second year, and $60,000 in the third year.
The weighted average cost of capital is 10%. Find out the discounted payback period of Funny Inc.

First, we will find out the present value of the cash flow.

Year 0:- =150000/(1+0.10)^0 150000

Year 1: =70000/(1+0.1)^1 63636.36
Year 2: =60000/(1+0.1)^2 49586.78
Year 3: =60000/(1+0.1)^3 45078.89

Now, we will calculate the cumulative discounted cash flows –

Year 0: -150000
Year 1: 86363.64 =F10-F11
Year 2: 36776.86 =D18-F12
Year 3: -8302.03 =D19-F13

Now, we will use the formula of discounted payback period to find out the DPP.

Discounted Payback Period = 2.82 years =2+(D19/F13)

and $60,000 in the third year.
od of Funny Inc.