Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / A project manager is using the payback method to make the final decision on which project to undertake
A project manager is using the payback method to make the final decision on which project to undertake. The company has a 20% required rate of return and expects a 3% rate of inflation for the following five years. What is the discount factor for Year 3? O 0.66 0.81 O 0.44 0.54
Ans) 0.54
Here required rate of return = 20%
Expected rate of inflation = 3%
Thus discount rate to be used = 20% + 3% =23%
Thus Discount factor for 3rd year = 1/(1+r)^3
= 1/(1+23%)^3
= 1/(1.23)^3
= 0.54
