PAYBACK PERIOD Project L costs $75,000, its expected cash inflows are $11,000 per year for 11...

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PAYBACK PERIOD Project L costs $75,000, its expected cash inflows are $11,000 per year for 11...

PAYBACK PERIOD

Project L costs $75,000, its expected cash inflows are $11,000 per year for 11 years, and its WACC is 11%. What is the project's payback? Round your answer to two decimal places.

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Answer 1

Answer #1

Payback period is the number of years it takes to re-earn the invested cash flow.

Invested cash flow = $75,000

Expected cash in flow every year = $11,000

Expected cash flow in 6 years = 6 * $11,000 = $66,000

Required amount to re-earn the cash flow amount = $75,000 - $66,000 = $9,000

Fraction of year 7 = $9,000/$11,000 = 0.82 year

Payback = 6 + 0.82 years = 6.82 years

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Answer 2

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Add Answer to: PAYBACK PERIOD Project L costs $75,000, its expected cash inflows are $11,000 per year for 11...

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PAYBACK PERIOD Project L costs $75,000, its expected cash inflows are $11,000 per year for 11...