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

WACC: 10.00%

Year 0 1 2 3

---------------------------------------------

Cash flows -$900 $500 $500 $500 (Points : 10)

1.88 years

2.09 years

2.29 years

2.52 years

2.78 years

We use the formula to solve for the discounted payback period:
DPP = ln ( 1 / (1-P x r /A) ) / ln (1 + r)
From the problem
P = 900
r = 0.1
A = 500

Substituting:
DPP = ln (1 / (1 - 900(0.10)/500) / ln ( 1 + 0.10)
DPP = 2.09 years

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Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?WACC: 10.00%Year 0 1 2 3---------------------------------------------Cash flows -$900 $500 $500 $500 (Points : 10)1.88 years2.09 years2.29 years2.52 years2.78 years

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