Question

Beta Enterprises, Inc. has a WACC of 11% and is considering a project that requires a cash outlay of $1,150 now with cash inflows of $575 at the end of Year 1, $495 at the end of Year 2, and $875 at the end of Year 3. What is the project's discounted payback? Note: Enter your answer rounded off to two decimal points since discounted payback is in terms of years and fractions of years. For example, if your answer is 3.456 years then enter as 3.46 in the answer box

Answer 1

Statement showing Discounted payback period
Years	cash Flow	PV @ 11%	Present Value	Cumulative discounted Cash flow
0	-$ 1,150.00	1	-$ 1,150.00	-$            1,150.00
1	$     575.00	0.9009	$     518.02	-$                631.98
2	$     495.00	0.8116	$     401.74	-$                230.24
3	$     875.00	0.7312	$     639.80	$                409.56
Discounted payback period=Year before the discounted payback period occurs + (Cumulative cash flow in the year before recovery / Discounted cash flow in the year after Recovery
Discounted payback period=2 Years+230 / 639.8
=			2.36 Years