Question

Project L costs $65,000, its expected cash inflows are $15,000 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

Year	Cash flows	Present value@10%	Cumulative Cash flows
0	(65000)	(65000)	(65000)
1	15000	13636.36	(51363.64)
2	15000	12396.69	(38966.95)
3	15000	11269.72	(27697.23)
4	15000	10245.20	(17452.03)
5	15000	9313.82	(8138.21)
6	15000	8467.11	328.9
7	15000	7697.37	8026.27
8	15000	6997.61	15023.88(Approx).

Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=5+(8138.21/8467.11)

=5.96 years(Approx).