Problem 11-4 Payback period Project L costs $75,000, its expected cash inflows are $14,000 per year...

Problem 11-4 Payback period Project L costs $75,000, its expected cash inflows are $14,000 per year for 7 years, and its WACC is 14%. What is the project's payback? Round your answer to two decimal places. years

Solutions

Expert Solution

Payback = 5.36 years

Payback = Year in which Cumulative CF is last negative -(Last negative cumulative CF/ CF of next year
= 5 - (-5000/14000)

=5.36 years

WORKINGS

Year	Cash flows	Cumulative CF
0	-75000	-75000
1	14000	-61000
2	14000	-47000
3	14000	-33000
4	14000	-19000
5	14000	-5000
6	14000	9000
7	14000	23000

jeff jeffy answered 1 year ago

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