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Project L costs $70,000, its expected cash inflows are $16,000 per year for 8 years, and its WACC is 13%. What is the project's discounted payback?

User Yaur
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1 Answer

3 votes

Answer:

6.89 years

Step-by-step explanation:

The discounted payback period can be calculated by using the following table

Year Cash flows PV(13%) Cumulative Cash flows

0 (70000) (70000) (70000)

1 16000 14159.29 (55840.71)

2 16000 12530.35 (43310.36)

3 16000 11088.80 (32221.56)

4 16000 9813.10 (22408.46)

5 16000 8684.16 (13724.30)

6 16000 7685.10 (6039.20)

7 16000 6800.97 761.77

8 16000 6018.56 6780.33

Discounted Payback = 6 years + 6039/ 6801

Discounted Payback = 6.89 years

User Dognotdog
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