posted by .

Masulis Inc is considering a project that has the following cash flow and WACC Data .what is the project discounted payback
WACC 10%
years 0 1 2 3 4
CASH FLOW -700 525 485 445 405

• Finance ( NEED HELP BAD) -

To calculate the discounted payback period, it is necessary to reduce the cash flow to the present value (year 0) by applying the given WACC (weighted average cost of capital). For year 1, we simply divide by 1.1. For year 2, we divide by 1.1², and so on.
Here is a tabulated version of the calculations. It is difficult to align the column heading, so they are given here:
1. Year
2. Cash Flow
3. Present value of Cash Flow, based on WACC of 10%
4. Cumulative present value of cash flow obtained by adding current year value to previous cumulative value.

0 -700.00 -700.00 -700.00
1 +525.00 +477.27 -222.73
2 +485.00 +400.83 +178.10
3 +445.00 +334.33 +512.43
4 +405.00 +276.62 +789.05

Note that the (+) signs have been added to align the columns properly, and have no other significance.

Conclusion, since the cumulative discounted cash flow goes from negative (-222.73) to positive (+178.10) during year 1, we conclude that the discounted payback is approximately 19 months.

Similar Questions

1. Investing ( pease help)

Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR?

Warnock Inc is considering a project that has the following cash flow and WACC Data What is the projects NPV ?
3. finance

Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of \$15,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of \$7,000 and \$12,000 at the end of Years 1 …
4. FINANCE

Tim recently invested \$3,500 in a project that is promising to return 10.75 percent per year. The cash flows are expected to be as follows: End of Cash Year Flow 1 \$750 2 800 3 ?
5. finance

Thompson stores is considering a project that has the following cash flow data. What is the project's IRR. Note that a project's projected IRR can be less than the WACC and even negative, in which case it wll be rejected. Year 0 (\$1,000), …
6. Corporate Finance

1. The Federal Reserve recently shifted its monetary policy, causing Lasik Vision's WACC to change. Lasik had recently analyzed the project whose cash flows are shown below. However, the CFO wants to reconsider this and all other proposed …
7. Finance

your company, Beta Corporation, is considering a new project which you must analyze. Based on the following data, what is the project's Year 1 operating cash flow?
8. Finance

Thompson Stores is considering a project that has the following cash flow data. What is the project's IRR?
9. Finance

Houston Inc. is considering a project which involves building a new refrigerated warehouse which will cost \$7,000,000 at year = 0 and which is expected to have before tax operating cash flows of \$500,000 at the end of each of the next …
10. Finance

The following is the cash flow forecast for Project A. Time: 0,1,2,3,4 Project A: (8500), 3600, 2400, 2850, 5200 I need to find the discounted payback, NPV, IRR, and MIRR at a cost of capital of 8.25%. I used Excel and got the following …

More Similar Questions