Question

5. Project L costs $30,000, its expected cash inflows are $8,000 per year for 8 years, and its WACC is 10%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places.

years

Answer 1

Ans:

Payback period = A + ((C-B)/C)

= 4 + ((4967-326)/4967)

= 4 + 4641/4967

= 4.93 years

A = year before where cash flow become positive = 4

B = cummulative amount in the year where amount become positive = 326
C = total amount of discounted cash flow in the year where amount become positive = 4967

Year	Present value factor =1/(1+r)^n	Present value factor (B)	Cash flow (A)	Present value of cash flows (A*)	Cummulative cash flows
					-30000
1	1/(1+10%)	0.9091	8000	7273	-22727
2	1/(1+10%)^2	0.8264	8000	6612	-16116
3	1/(1+10%)^3	0.7513	8000	6011	-10105
4	1/(1+10%)^4	0.6830	8000	5464	-4641
5	1/(1+10%)^5	0.6209	8000	4967	326
6	1/(1+10%)^6	0.5645	8000	4516	4842
7	1/(1+10%)^7	0.5132	8000	4105	8947
8	1/(1+10%)^8	0.4665	8000	3732	12679