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For that project at 10 per cent, the discounted payback period is nearest

  • A.5 years
  • B.3 years
  • C.6 years
  • D.4 years

Answer: C

Correct answer: 6 years

The receipts must now cover the interest as well, so \( 10{,}000 \times (P/A, 10\%, n) \) must reach 40,000. At five years the factor is 3.791, giving 37,910 - not enough; at six years it is 4.355, giving 43,553. Recovery therefore falls in the sixth year, two years later than the simple calculation suggested.

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