The discounted payback period method discounts the estimated cash flows by the project’s cost of capital and then calculates the time needed to recover the investment.
| Year |
Cash Flow |
Discounted
Cash Flow |
Cumulative
Discounted
Cash Flow |
| 0 |
−$200,000 |
−$200,000.00 |
−$200,000.00 |
| 1 |
60,000 |
53,571.43 |
−146,428.57 |
| 2 |
80,000 |
63,775.51 |
−82,653.06 |
| 3 |
70,000 |
49,824.62 |
−32,828.44 |
| 4 |
60,000 |
38,131.08 |
5,302.64 |
| 5 |
50,000 |
28,371.30 |
33,673.98 |
discounted payback period =number of years until the year before full recovery + 
|
