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Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and...
Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and immediate calc for payback
| g. At a cost of capital of 12%, what is the discounted payback period for these two projects? | |||||||||
| WACC = | 12% | ||||||||
| Project A | |||||||||
| Time period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
| Cash flow | -$375 | -$300 | -$200 | -$100 | $600 | $600 | $926 | -$200 | |
| Disc. cash flow | -$375 | -$268 | -$159 | -$71 | $381 | $340 | $469 | -$90 | |
| Disc. cum. cash flow | |||||||||
| Intermediate calculation for payback | |||||||||
| Payback using intermediate calculations | 5.000 | ||||||||
| Project B | |||||||||
| Time period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
| Cash flow | -$575 | $190 | $190 | $190 | $190 | $190 | $190 | $0 | |
| Disc. cash flow | -$575 | $170 | $151 | $135 | $121 | $108 | $96 | $0 | |
| Disc. cum. cash flow | |||||||||
| Intermediate calculation for payback | |||||||||
| Payback using intermediate calculations | 3.983 | ||||||||
| Discounted Payback using PERCENTRANK | 3.983 | Ok because cash flows follow normal pattern. | |||||||
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