Computing Discounted Payback

for the Project

Assume we will accept the project if it pays back

on a discounted basis in $2$ years.

Compute the PV for each cash flow and determine

the payback period using discounted cash flows

Year $1$: $165,000-63,\frac{120}{{1\mathrm{.}12}^1}=108,643$

Year $2$: $108,643-70,\frac{800}{{1\mathrm{.}12}^2}=52,202$

Year $3$: $52,202-91,080/1\mathrm{.}123=-12,627$ project

pays back in year $3$

Do we accept or reject the project?