Question

Calculate the discounted payback for a project with the following projected cash flows: Year Cash Flow  ...

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)

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Answer #1
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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