Calculate the discounted payback for a project with the following projected cash flows:
Year | Cash Flow |
0 | -2,500 |
1 | 600 |
2 | 1300 |
3 | 827 |
4 | 600 |
Assume the risk-adjusted WACC is 8.4%.
Enter your answer as a number with 2 decimal places of precision (i.e. 1.23)
Do not round intermediate calculations (PVs)
Year | Cash flows | Present [email protected]% | Cumulative Cash flows |
0 | (2500) | (2500) | (2500) |
1 | 600 | 553.51 | (1946.49) |
2 | 1300 | 1106.33 | (840.16) |
3 | 827 | 649.26 | (190.9) |
4 | 600 | 434.54 | 243.64(Approx). |
Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).
=3+(190.9/434.54)
=3.44 years(Approx).
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