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Garvin Enterprises is considering a project that has the following cash flow and WACC data. What...

Garvin Enterprises is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? Enter your answer rounded to two decimal places. For example, if your answer is 12.345 then enter as 12.35 in the answer box. WACC: 12% Year: 0 1 2 3 Cash flows: -$1,100 $550 $550 $550

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Expert Solution

Year Cash flows PVF PV of cash flows Cumulative Discounted cash flows
0 (1,100.00)          1.00000            (1,100.00)                                              (1,100.00)
1       550.00          0.89286                 491.07                                                 (608.93)
2       550.00          0.79719                 438.46                                                 (170.47)
3       550.00          0.71178                 391.48                                                   221.01
Hence, discounted Payback period = 2 + 170.47/391.48
=2.4355 years
i.e. 2.44 years

jeff jeffy answered 1 year ago
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