Question

Project L costs $35,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is 9%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places.

  years:

Answer 1

Projects Discounted Payback Period

Year	Cash Flows ($)	Present Value Factor at 9%	Discounted Cash Flow ($)	Cumulative net discounted Cash flow ($)
0	-35,000	1.000000	-35,000.00	-35,000.00
1	10,000	0.917431	9,174.31	-25,825.69
2	10,000	0.841680	8,416.80	-17,408.89
3	10,000	0.772183	7,721.83	-9,687.05
4	10,000	0.708425	7,084.25	-2,602.80
5	10,000	0.649931	6,499.31	3,896.51
6	10,000	0.596267	5,962.67	9,859.19
7	10,000	0.547034	5,470.34	15,329.53
8	10,000	0.501866	5,018.66	20,348.19

Discounted Payback Period = Years before full recover + (Unrecovered cash inflow at start of the year/cash flow during the year)

= 4 Year + ($2,602.80 / $6,499.31)

= 4 Year + 0.40 Years

= 4.40 Years

“The Discounted Payback Period for Project will be 4.40 Years”