Question

1. Project A cost $1,000 and Project B cost $1,000, there expected net cash inflows are shown on the timeline below and there WACC is 9.00%. What is Project B's Discounted Payback?

WACC 9.00%

                      0              1              2               3              4

                        l              l               l                l                l

ProjA      -$1,000         $675       $650

ProjB   -$1,000       $1,000   $700        $50           $50

Answer 1

Year	Cash Flow	Discount factor	Discounted Cash flow	Cumulative Discounted Cash flow
a	b	c=1.09^-a	d=b*c	e
0	$         -1,000	1.0000	-1,000	$   -1,000
1	1,000	0.9174	917	-83
2	700	0.8417	589	507
3	50	0.7722	39	545
4	50	0.7084	35	581
Discounted payback	=	1+(83/589)
	=	1.14	Years