Question

please help on the calculations for this problem pictured using excel and show excel calculations and output used also. thanks in advanced for your help!

The payback method helps firms establish and identify a maximum acceptatite payback period that helps in their capital budgeting decisions Consider the case of Cute Camel Woodcraft Company: Cute Camel Woodcraft Company is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Delta's expected future cash flows. To answer this question, Cute Camel's CFO has asked that you compute the project's payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table. (Note: Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.) Year 1 Year 0 -$5,000,000 Year 2 $4,250,000 Year 3' $1,750,000 $2,000,000 Expected cash flow Cumulative cash flow Conventional payback period: years The conventional payback pertod ignores the time value of money, and this concerns Cute Camel's CFO. He has now asked you to compute Delta's discounted payback period, assuming the company has a 7% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Year 0 $5,000,000 Year 1 $2,000,000 Year 2 $4,250,000 Year 3 $1,750,000 Cash flow Discounted cash flow Cumulative discounted cash flow

Answer 1

A B C D E Year 0 Year 1 Year 2 Year 3 -5000000 2000000 4250000 1750000 -5000000 - 3000000 1250000 3000000 1.705882353 2 Expected Cash flow 3 Cumulative Cash flow 4 Conventional payback 5 6 Discounted Cash flow 7 Cumulative discounted cash flow 8 Discounted payback 9 -5000000 1869158.879 3712114.595 1428521.285 -5000000.00 -3130841.12 581273.47 2009794.76 1.8434

B Year 0 -5000000 =B2 =1-C3/D2 C Year 1 2000000 =B3+C2 D Year 2 4250000 =C3+D2 E Year 3 1750000 =D3+E2 2 Expected Cash flow 3 Cumulative Cash flow 4 Conventional payback 6 Discounted Cash flow 7 Cumulative discounted cash flow 8 Discounted payback 9 =B2/1.0740 =C2/1.07^1 =D2/1.07^2 =E2/1.0743 =B6 =B7+C6 =C7+D6 =D7+E6 =1-C7/06

The discounted payback period

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