Question

# A project has an initial cost of \$53,175, expected net cash inflows of \$12,000 per year...

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.

 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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