While calculating Payback period the rate of interest is not given any importance. In this problem the payback period is - 3 1/2 years. 15000 x 3 .5 years = 525000

As per PP rule it is a good project. The life of Project T is 8 years and the payback period is only 3 1/2 years.

and going to earn 15,000 for the next 4 1/2 years.

Project T has a cost of $52,500, its expected cash flows are $15,000 per year for 8 years,

and its required return is 12 percent. The management imposes a cutoff period of 5 years.

a. What is the project’s payback period? Should the project be accepted using the PP rule?

b. What is the project’s discounted payback period? Should the project be accepted using

the DPP rule?

Can't find formulas or examples anywhere in my book. If you could just show me the steps, or give me the formulas to use, that'd be great.