Question

Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? 

WACC: Year Cash flows 10.00% 0 1 $925 $525 2 4 3 $445 $485 $405 

• a. 2.25 years 

• b. 1.86 years 

• c. 2.14 years 

• d. 2.40 years 

• e. 1.95 years

Answer 1

D9 f =2+46.9/334.34 A B с D E F 1 2 year 3 st Cash flows 0 $ 1 $ 2 $ 3 $ 4 $ pv@10% (925.00) 525.00 485.00 445.00 405.00 Present value Cumulative Discounted cash flows 1.0000 $ (925.00) $ (925.00) 0.9091 $ 477.27 $ (447.73) 0.8264 $ 400.83 $ (46.90) 0.7513 $ 334.34 $ 287.43 0.6830 $ 276.62 $ 564.05 5 6 7 00 Discounted Payback 2+46.9/334.34 2.14 years 9 10 Answer C

D9 fic =2+46.9/334.34 с D E F А B 1 2 year Cash flows 30 |-925 4 1 525 5 2 485 6 3 445 74 405 pv@10% 1 =C3/1.1 =C4/1.1 =C5/1.1 =C6/1.1 Present value =B3*C3 =B4*C4 =B5* C5 =B6*C6 =B7*C7 Cumulative Discounted cash flows =D3 =E3+D4 =E4+D5 =E5+D6 =E6+D7 od Discounted Payback 2+46.9/334.34 +2+46.9/334.34 9 10 years Answer C 11