11. Project L requires an initial outlay at t = 0 of $70,000, its expected cash...

11.

Project L requires an initial outlay at t = 0 of $70,000, its expected cash inflows are $16,000 per year for 9 years, and its WACC is 13%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places.

________________years

Expert Solution

Ans 6.89 years

Year	Project Cash Flows (i)	DF@ 13%	DF@ 13% (ii)	PV of Project A ( (i) * (ii) )	Cumulative Cash Flow
0	-70000	1	1	(70,000.00)	(70,000.00)
1	16000	1/((1+13%)^1)	0.885	14,159.29	(55,840.71)
2	16000	1/((1+13%)^2)	0.783	12,530.35	(43,310.36)
3	16000	1/((1+13%)^3)	0.693	11,088.80	(32,221.56)
4	16000	1/((1+13%)^4)	0.613	9,813.10	(22,408.46)
5	16000	1/((1+13%)^5)	0.543	8,684.16	(13,724.30)
6	16000	1/((1+13%)^6)	0.480	7,685.10	(6,039.20)
7	16000	1/((1+13%)^7)	0.425	6,800.97	761.77
8	16000	1/((1+13%)^8)	0.376	6,018.56	6,780.32
9	16000	1/((1+13%)^9)	0.333	5,326.16	12,106.48
		NPV	12,106.48


Discounted Payback Period =		6 years + 6039.20/6800.97
		6.89 years

jeff jeffy answered 1 year ago

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