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Project L costs $45,000, its expected cash inflows are $15,000 per year for 12 years, and...

Project L costs $45,000, its expected cash inflows are $15,000 per year for 12 years, and its WACC is 11%. What is the project's payback? Round your answer to two decimal places.

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Answer #1

Payback period without discounting: 45000/15000 = 3 Years

Payback period with discounting: WACC = 11%

Year CashFlow PV
0 -45000 -45000 -45000
1 15000 13513.51 -31486.5
2 15000 12174.34 -19312.1
3 15000 10967.87 -8344.28
4 15000 9880.965 1536.685
5 15000 8901.77
6 15000 8019.613
7 15000 7224.876
8 15000 6508.897
9 15000 5863.872
10 15000 5282.767
11 15000 4759.25
12 15000 4287.612

Break even happens in 4th year

excess amount = 1536.685

Period =8344.28/9880.965 = 0.844 * 1 Year = 308 Days

Discounted payback period = 3 Years 308 Days

Payback = PV of all cash flows = $52385.34

Payback = 116.41%

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