A project has cash inflows of Rs. 400,000 in each of the next three years and requires an initial investment of Rs. 900,000. If the discount rate is 10%, which statement is correct about its discounted payback?
Correct answer: C. It occurs during the third year
- A. It occurs during the first year
- B. It occurs during the second year
- C. It occurs during the third year
- D. It is not reached within three years
Explanation
The present values of the inflows are approximately Rs. 363,636, Rs. 330,579, and Rs. 300,526. Their cumulative value exceeds Rs. 900,000 only during the third year, so discounted payback occurs then.
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