Question

What is both projects pay back and discountef payback? Plesse show all work such as how to calculate cumlative values

3. Tag Inc. is considering a project that has the following cash flow data. What is the project's payback? Year Cash flow from project -$1,100 $500 $500 $300 4. Fer Designs is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? The WACC is 9%. Year Cash flow from project -$1,000 $400 $100 $800

Answer 1

- A B 1 3) 500 Year 1 2 3 Cash inflow Cumulative cash inflow 500 500 300 1300 1000 Payback period = 2 + (1,100 - 1,000) / 300 = 2 + (100/300) = 2.33 years Payback period = 2.33 years 13 14 Year 1 2 Cash flow 400 T 100 800 Discount factor @9% 0.9174 0.8417 0.7722 Discounted cash flow Cumulative cash flow 366.97 366.97 84.17 451.14 617.75 1068.89 15 16 17 Discounted payback period = 2 + (1,000 - 451.14)/ 617.75 = 2 + (548.86 / 617.75) = 2.89 years Discounted payback period = 2.89 years

EXCEL FORMULA:

ДА в с 3) Year Cash inflow 500 500 300 Cumulative cash inflow =C4 =D4+C5 =D5+C6 Payback period = 2 + (1,100 - 1,000) / 300 = 2 + (100/300) = 2.33 years Payback period = 2.33 years 4) Year 1 Cash flow 400 100 800 Discount factor @9% 1=1/(1+9%)^B14 =1/(1+9%)^B15 =1/(1+9%)^B16 Discounted cash flow | Cumulative cash flow =C14*D14 =E14 =C15*D15 =F14+E15 =C16*D16 =F15+E16 13 Discounted payback period = 2 + (1,000 - 451.14) / 617.75 = 2 + (548.86 / 617.75) = 2.89 years Discounted payback period = 2.89 years