Hey people, I dont understand where do the cash flow figures come from for the calculation of discounted payback period. Like if a question is like this - Calculate the discounted payback period - 0 1 2 3 Net Cash Flow -2000 1000 800 600 Discounted NCF ? ? ? ? this is from schweser and its the same way given in the CFAI book…no explaination…
You need to take the PV of the cash flows in order to obtain the discounted payback period.
Take the PV of your investments Cash Flows…suppose the discount rate is 10% Your CF will be 1000/1.10 = 909. 800/1.1^2 = 661.157 600/1.1^3 = 450.788 To Calculate the Discounted NCF 2 + (2000 -(909.09 + 661.157)/450.788 ==2.95
Use the calculator if you are using TI BA II Plus
TI BA Plus Professional will compute it for you.
thnku so much people…tht really helps…
How do you do this on the TI?
jcole21 Wrote: ------------------------------------------------------- > How do you do this on the TI? After you enter the Cash Flows, press NPV and enter the interest rate. Then scroll down until you see DPB and press compute. This is only on the professional, not on the regular TI.