Question

A project has an initial cost of $53,175, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places.

Answer #1

Year | Cash Flow | PVF@ 13% | Present Value of Cash Flow | Cumulative Cash Flow |

1 | 12000 | 0.88495575221 | 10619.4690265 | 10619.47 |

2 | 12000 | 0.78314668337 | 9397.76020049 | 20017.23 |

3 | 12000 | 0.69305016227 | 8316.60194724 | 2833.83 |

4 | 12000 | 0.61331872767 | 7359.82473204 | 35693.66 |

5 | 12000 | 0.54275993599 | 6513.11923188 | 42206.78 |

6 | 12000 | 0.48031852743 | 5763.82232915 | 47880.60 |

7 | 12000 | 0.42506064374 | 5100.72772476 | 52981.33 |

8 | 12000 | 0.37615986172 | 4513.91834040 | 57495.25 |

9 | 12000 | 0.33288483338 | 3994.61800032 | 61489.87 |

Cash Outflow = 53,175

Discounted Payback period = 7 years +(57495.25 - 53,175) / 4513.91834040

= 7 years + 0.95709529375

= 7.96 years

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