Question

DISCOUNTED PAYBACK Project L costs $45,000, its expected cash inflows are $11,000 per year for 8 years, and its WACC is 8%. What is the project's discounted payback? Round your answer to two decimal places. 4.42 years

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Please explain how to solve this without excel.

Answer 1

Ans 5.16 years

Year	Project Cash Flows (i)	DF@ 8% (ii)	DF@ 8% (ii)	PV of Project A ( (i) * (ii) )	Cumulative Cash Flow
0	-45000	1	1	(45,000.00)	(45,000.00)
1	11000	1/ (1 + 8%)^1	0.926	10,185.19	(34,814.81)
2	11000	1/ (1 + 8%)^2	0.857	9,430.73	(25,384.09)
3	11000	1/ (1 + 8%)^3	0.794	8,732.15	(16,651.93)
4	11000	1/ (1 + 8%)^4	0.735	8,085.33	(8,566.60)
5	11000	1/ (1 + 8%)^5	0.681	7,486.42	(1,080.19)
6	11000	1/ (1 + 8%)^6	0.630	6,931.87	5,851.68
7	11000	1/ (1 + 8%)^7	0.583	6,418.39	12,270.07
8	11000	1/ (1 + 8%)^8	0.540	5,942.96	18,213.03
		TOTAL		18,213.03
Discounted Payback Period =		5 year + 1080.19 / 6931.87
		5.16 years