Given the following project information and assuming straight-line depreciation to zero, what is the discounted payback period? Initial investment = $500,000; life = 5 years; cost savings = $160,000 per year; salvage value = $30,000 in year 5; tax rate = 34%; discount rate = 13%

Finance Dec 01, 2020

Given the following project information and assuming straight-line depreciation to zero, what is the discounted payback period? Initial investment = $500,000; life = 5 years; cost savings = $160,000 per year; salvage value = $30,000 in year 5; tax rate = 34%; discount rate = 13%.

Expert Solution

Workings:

Initial Investment = $500,000

Useful Life = 5 years

Annual Depreciation = Initial Investment / Useful Life

Annual Depreciation = $500,000 / 5

Annual Depreciation = $100,000

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