Question: Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and immediate calc for payback g. At a cost of
Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and immediate calc for payback
| g. At a cost of capital of 12%, what is the discounted payback period for these two projects? | |||||||||
| WACC = | 12% | ||||||||
| Project A | |||||||||
| Time period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
| Cash flow | -$375 | -$300 | -$200 | -$100 | $600 | $600 | $926 | -$200 | |
| Disc. cash flow | -$375 | -$268 | -$159 | -$71 | $381 | $340 | $469 | -$90 | |
| Disc. cum. cash flow | |||||||||
| Intermediate calculation for payback | |||||||||
| Payback using intermediate calculations | 5.000 | ||||||||
| Project B | |||||||||
| Time period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
| Cash flow | -$575 | $190 | $190 | $190 | $190 | $190 | $190 | $0 | |
| Disc. cash flow | -$575 | $170 | $151 | $135 | $121 | $108 | $96 | $0 | |
| Disc. cum. cash flow | |||||||||
| Intermediate calculation for payback | |||||||||
| Payback using intermediate calculations | 3.983 | ||||||||
| Discounted Payback using PERCENTRANK | 3.983 | Ok because cash flows follow normal pattern. | |||||||
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