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Project K costs $60,000, its expected cash inflows are $14,000 per year for 8 years, and...

Project K costs $60,000, its expected cash inflows are $14,000 per year for 8 years, and its WACC is 13%. What is the project's discounted payback? Round your answer to two decimal places.

_________years

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Answer #1
Year Cash flows Present value@13% Cumulative Cash flows
0 (60000) (60000) (60000)
1 14000 12389.38 (47610.62)
2 14000 10964.05 (36646.57)
3 14000 9702.70 (26943.87)
4 14000 8586.46 (18357.41)
5 14000 7598.64 (10758.77)
6 14000 6724.46 (4034.31)
7 14000 5950.85 1916.54
8 14000 5266.24 7182.78(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).

=6+(4034.31/5950.85)

=6.68 years(Approx).

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