Discounted payback vs. payback period
IN Finance: RE: Discounted payback period and payback period:
What would have to be true for the discount period to be shorter than the payback period?
I understand both the payback period (2 years, to recoup the investment)and the discounted payback period ( say 10%, 3 years to recoup the investment), but can not see a way for the payback period to be greater than the discounted payback period...
I asked a question on 2/17/11... It's called: Discounted payback vs. Payback
I was asking when would a "discounted payback period" be shorter than the "Payback period" On an investment?
This is a trivia question from the finance college course.. payback period
Ok, he calls this the "brain teaser" : What would have to be true for the discounted payback period to be shorter than the payback period? The example he had just shown us involved: investment: -100,000 year 1: 55,000 2: 45,000 3: 35,000 4: -25000
PV of cash flow: -100,000 year1: 50,000 2: 37190 3: 26,296 4: -17,075
I understand the math to each figure, but if you have $2 and you discount it , say .30, then the discount- will always be less that the starting amount ($2). Remember, he just showed us how to figure this out. So we know nothing else.
