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Question 2 A project requires an initial investment of $100,000 and will return…

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Wize University Introduction to Finance Textbook > Capital Budgeting

Payback Period

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Question 2

A project requires an initial investment of $100,000 and will return $30,000 per year indefinitely. The firm's average cost of capital is 8% and this project is slightly riskier than their usual operations.

Risk premiums:
Must less risky: -2%
Slightly less risky: -1%
Equal risk: 0%
Slightly more risky: +1%
Much more risky: +2%

Compute the payback period and discounted pay back period.
Round your answers to 2 decimal places.
Payback period
Discounted payback period
More Payback Period Questions:
Question 1
A firm is considering a project with an initial after-tax cash outflow of $5,000 and inflows of $1,000 in year 1, $6,000 in year 2 and $3,000 in year 3. The firm's cost of capital is 6% .
Compute the payback period and discounted payback period for this project.
ABC Company is considering a new project that will require an initial investment of $100,000. The project is expected to generate the following cash flows over the next five years:
Year 1: $30,000 Year 2: $40,000 Year 3: $50,000 Year 4: $40,000 Year 5: $30,000
The required rate of return for this project is 10%.