# Calculating payback, discounted payback and IRR

1. Stern Associates is considering a project that has the following cash flow data. What is the project's payback?

Year 0 1 2 3 4 5

Cash flows -$1,100 $300 $310 $320 $330 $340

A. 2.31 years

B. 2.56 years

C. 2.85 years

D. 3.16 years

E. 3.52 years

2. Oranges Inc. is considering a project that has the following cash flow and Cost of Capital data. What is the project's discounted payback?

Cost of Capital: 10.00%

Year 0 1 2 3 4

Cash flows -$950 $525 $485 $445 $405

A. 1.61 years

B. 1.79 years

C. 1.99 years

D. 2.22 years

E. 2.44 years

3. Maxwell Food is considering a project that has the following cash flow data. What is the project's IRR?

Year 0 1 2 3 4 5

Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100

A. 2.08%

B. 2.31%

C. 2.57%

D. 2.82%

E. 3.10%

https://brainmass.com/business/internal-rate-of-return/calculating-payback-discounted-payback-and-irr-469102

#### Solution Preview

Please refer attached file for better understanding of formulas.

Problem 1

Year Cash In flows Cumulative cash inflow

1 $300 $300

2 310 610

3 320 930

4 330 1,260

5 ...

#### Solution Summary

There are 3 problems. Solutions describe the methodology to calculate project's payback period, discounted payback period or IRR as the case may be.