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masulis i

1 pts Question 18 Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the projects
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Answer #1
Solution:
Given:
WACC = 10.00%
Year Cash Inflow Discounting Factor @ 10% Working Discounted Cash Flow Cummalative cash flow Working
(A) (B) (C =A*B)
1 $525 0.909090909 (1/1.10^1) $477.27 $477.27 $477.27
2 $485 0.826446281 (1/1.10^2) $400.83 $878.10 (400.83+$477.27)
3 $445 0.751314801 (1/1.10^3) $334.34 $1,212.43 ($878.10+$334.34)
4 $405 0.683013455 (1/1.10^4) $276.62 $1,489.05 ($1212.43+$276.62)
Total $1,489.05
Discounted Pay back period is that period where Cash Inflow = Cash Outflow
Cash Outflow = $750
Year Cash Inflow
1 $477.27
In Year 2 $272.73 ($750-$477.27)
In Year 1 Cash Inflow of $477.27 is recovered , balance Cash Inflow of $272.73 ($750-$477.27) is recovered in year 2 from cash inflow of $400.83
So Discounted pay back period is 1 Year and 0.68 Years ($272.73/$400.83)
Discounted pay back period = 1.68 Years
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