Question

Alpha Enterprises, Inc. is considering a project that has the following cash flows: Year: Cash Flow; 0: -$1,000 1: 500 2: 300 3: 900 4: 400 The company’s WACC is 10%. What is the project’s ordinary payback? Enter your answer rounded to two decimal places.

Answer 1

Ordinary payback is not discounted payback and only regular payback:-

Year Cash flow Cumulative cash flow Year (1,000.00) (500.00) (200.00) 700.00 Cash flow Cumulative cash flow (1,000.00) (500.00) (200.00) (1,000.00) 500.00 0 0 (1,000.00) 1 1 500.00 21 31 300.00 2 300.00 900.00 900.00 700.00 1,100.00 4 400.00 4 400.00 1,100.00 Q25+-S25/R26 2.22