Question

Project L requires an initial outlay at t = 0 of $45,000, its expected cash inflows are $11,000 per year for 6 years, and its WACC is 9%. What is the project's payback? Round your answer to two decimal places. years

Answer 1

Year	Cash flows of Project L	Cumulative Cashflows
-	-45,000.00	-45,000.00
1	11,000.00	-34,000.00
2	11,000.00	-23,000.00
3	11,000.00	-12,000.00
4	11,000.00	-1,000.00
5	11,000.00	10,000.00
6	11,000.00	21,000.00
Payback period=	A+(B/C)
A=Last period number with negative cumulative cashflows
B=absolute value of cumulative net cash flow at the end of period A
C=total cashflow during the period following period A
	Payback period=	4+(1000/11000)
		4.09	years