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Project L costs $65,000, its expected cash inflows are $9,000 per year for 9 years, and...

Project L costs $65,000, its expected cash inflows are $9,000 per year for 9 years, and its WACC is 9%. What is the projects payback?

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Expert Solution

Solution :

As per the Payback method the projects payback period is 7 years and 2.6667 months.

As per the Discounted payback period, the projects discounted payback period is greater than 9 years as the Initial Investment of $ 65,000 has not been earned till Year 9.

The total of cumulative discounted cash flows earned till years 9 is = $ 53,957.22 which is lesser than the Initial Investment of $ 65,000. Thus the Project's discounted payback period is greater than 9 years.

Please find the attached screenshot of the excel sheet containing the detailed calculation for the above solution.

jeff jeffy answered 1 year ago
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