Answer: Never
Working notes for the above answer is under
We have been provided with the information that
| Year | Cash Flow |
| 0 | -10600 |
| 1 | 3700 |
| 2 | 4900 |
| 3 | 2500 |
Now we calculate discounted Payback as under
| Year | Cash Flow |
PV factor at 7.5% |
Prasent value |
Incremental Cash Flow |
| A | B | C=A*B | ||
| 0 | -10600 | 1 | -10600 | -10600 |
| 1 | 3700 | 0.93023256 | 3441.8605 | -7158.14 |
| 2 | 4900 | 0.86533261 | 4240.1298 | -2918.01 |
| 3 | 2500 | 0.80496057 | 2012.4014 | -905.608 |
As we can see that during the life of the project the amount invested is not covered
(see year 3 incremental cash flow figure it is – 905.608)
