Project L requires an initial outlay at t = 0 of $60,000, its expected cash inflows are $9,000 per year for 11 years, and its WACC is 10%. What is the project's payback? Round your answer to two decimal places. years
Project L requires an initial outlay at t = 0 of $60,000, its expected cash inflows are $9,000 per year for 11 years, and its WACC is 10%. What is the project's payback? Round your answer to two decimal places. years
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...
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Project L requires an initial outlay at t = 0 of $60,000, its expected
years
Expert Solution
Step 1
Payback period:
The payback period is a simple method of capital investment evaluation. It counts on the time, i.e., the time taken by a project to recover its initial cash payment.
In the payback period method, any project with a shorter payback period is considered to be good, generally, the payback period for a project is compared with the management desired payback period, and is accepted only if it matches the criteria.
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