Regarding the regular payback period, after 1 year, the amount to recover is $2,000 ($5,000 - $3,000). After the second year, the amount is fully recovered.
The discounted payback period is found by first calculating the present values of each future cash flow. These present values of future cash flows are then used to determine the payback time period.
3,000 / (1 + .10)1 = 2,727
2,000 / (1 + .10)2 = 1,653
2,000 / (1 + .10)3 = 1,503.
Then:
5,000 - (2,727 + 1,653) = 620
620 / 1,503 = .4.
So, 2 + 0.4 = 2.4.
