Question

Assume the following cash flows for a convenience store project you are considering, the initial outflow is $657,338 followed by ten operating cash flows $123,550 in years 1 to 10. You will also receive a terminal cash flow of $438,500 also at year 10.

Compute the Payback of the project given an interest rate of 12%.

Answer 1

G E13 fx =SUM(E2:E12) А B с D E F 1 year Cash flows pv@12% Present value Cumulative Cash Flows 2 0 $ (657,338.00) 1.0000 $ (657,338.00) $ (657,338.00) 3 1 $ 123,550.00 0.8929 $ 110,312.50 $ (533,788.00) 4 2 $ 123,550.00 0.7972 $ 98,493.30 $ (410,238.00) 5 3 $ 123,550.00 0.7118 $ 87,940.45$ (286,688.00) 6 4 $ 123,550.00 0.6355 $ 78,518.26 $ (163,138.00) 7 5 $ 123,550.00 0.5674 $ 70,105.59 $ (39,588.00) 8 6 $ 123,550.00 0.5066 $ 62,594.28 $ 83,962.00 9 7 $ 123,550.00 0.4523 $ 55,887.75$ 207,512.00 10 8 $ 123,550.00 0.4039 $ 49,899.77 $ 331,062.00 11 9 $ 123,550.00 0.3606 $ 44,553.37$ 454,612.00 12 10 438500+123550 $ 562,050.00 0.32200 $ 180,965.06 $ 1,016,662.00 13 IRR 17.33% NPV $ 181,932.32 14 15 Payback 5+39588/123550 16 5.32 Years 17 = = 18

E13 fx =SUM(E2:E12) A B C D E F 1 year Cash flows pv@12% Present value Cumulative Cash Flows 20 |-657338 1 =C2*D2 1=C2 3 1 123550 =D2/1.12 =C3*D3 =F2+C3 4 2 123550 =D3/1.12 =C4*D4 =F3+C4 5 3 123550 =D4/1.12 =C5*D5 =F4+C5 6 4 123550 =D5/1.12 =C6*D6 =F5+C6 75 123550 =D6/1.12 =C7*D7 =F6+C7 8 6 123550 =D7/1.12 =C8*D8 =F7+C8 9 7 123550 =D8/1.12 =C9*D9 =F8+C9 10 8 123550 =D9/1.12 =C10*D10 =F9+C10 11 9 123550 =D10/1.12 =C11*D11 =F10+C11 12 10 438500+123550 =438500+123550 =D11/1.12 =C12*D12 I=F11+C12 13 IRR =IRR(C2:C12) NPV =SUM(E2:E12) 14 Payback 5+39588/123550 16 =5+39588/123550 Years = 17