Question

Must show excel formula for Disc Cum Cash, Intermediate calculation and for payback

g.    At a cost of capital of 12%, what is the discounted payback period for these two projects?
WACC   =	12%
Project A
	Time period	0	1	2	3	4	5	6	7
	Cash flow	-$375	-$300	-$200	-$100	$600	$600	$926	-$200
	Disc. cash flow	-$375	-$268	-$159	-$71	$381	$340	$469	-$90
	Disc. cum. cash flow
Intermediate calculation for payback
Payback using intermediate calculations
Project B
	Time period	0	1	2	3	4	5	6	7
	Cash flow	-$575	$190	$190	$190	$190	$190	$190	$0
	Disc. cash flow	-$575	$170	$151	$135	$121	$108	$96	$0
	Disc. cum. cash flow
Intermediate calculation for payback
Payback using intermediate calculations
	Discounted Payback using PERCENTRANK		Ok because cash flows follow normal pattern.

Answer 1

Payback Period for Project A = 5.32 years

Payback Period for Project B = 3.98 years

The formula of Discounted Pay Back Period = Discounted Pay Back Period (Years) = > Last Period with Negative Cumulative Cash Flow + {Absolue Value (no negative sign) of the Cumulative Discounted Cash Flow during the last period of negative Cumulative Discounted Cash Flow / Discounted Cumulative Cash Flow of the next year after the last period of negative Cumulative Discounted Cash Flow}