Discounted payback period.

Given the following two projects and their cash flows, calculate the discounted payback period with a

Discount rate of 5%, 10%, and 15%.

What do you notice about the payback period as the discount rate rises? Explain this relationship.

Cash Flow A B

Cost $10,000 $105,000

Cash flow year 1 $3,571 $21,000

Cash flow year 2 $3,571 $10,500

Cash flow year 3 $3,571 $42,000

Cash flow year 4 $3,571 $31,500

Cash flow year 5 $3,571 $5,250

Cash flow year 6 $3,571 $0

With a discount rate of 5%, 10% & 15% the cash outflow for project A is:

With a discount rate of 5%, 10% & 15% the cash outflow for project B is: