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DISCOUNTED PAYBACK Project L costs $30,000, its expected cash inflows are $8,000 per year for 8 years, and its WACC is 1...

DISCOUNTED PAYBACK

Project L costs $30,000, its expected cash inflows are $8,000 per year for 8 years, and its WACC is 10%. What is the project's discounted payback? Round your answer to two decimal places.

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Answer #1
Year Cash flows Present value@10% Cumulative Cash flows
0 (30,000) (30,000) (30,000)
1 8000 7272.73 (22727.27)
2 8000 6611.57 (16115.7)
3 8000 6010.52 (10105.18)
4 8000 5464.11 (4641.07)
5 8000 4967.37 326.3
6 8000 4515.79 4842.09
7 8000 4105.26 8947.35
8 8000 3732.06 12679.41

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).

=4+(4641.07/4967.37)

=4.93 year(Approx).

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