Fairfax Pizza is evaluating a project that would cost 90,000 dollars today. The

Question

Fairfax Pizza is evaluating a project that would cost 90,000 dollars today. The project is expected to have the following other cash flows: 23,300 dollars in 1 year, 25,800 dollars in 2 years, 292,143 dollars in 3 years, and 5,800 dollars in 4 years. The cost of capital of the project is 9.45 percent. What is the payback period for the project? Round your answer to 2 decimal places (for example, 2.89, 14.70, or 6.00).

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Thank you for your time .. Can you please answer this one as well?

Oxygen Optimization is evaluating a project that would cost 74,000 dollars today. The project is expected to have the following other cash flows: 26,900 dollars in 1 year, 21,900 dollars in 2 years, 127,328 dollars in 3 years, and 9,700 dollars in 4 years. The cost of capital of the project is 8.71 percent. What is the discounted payback period for the project? Round your answer to 2 decimal places (for example, 2.89, 14.70, or 6.00).

Explanation / Answer

1.

Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=2+(40900/292143)=2.14 years

2.

Discoutnted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period). =2+(30724/99109.53)=2.31 years(Approx).

Year Cash flows Cumulative Cash flows 0 (90,000) (90,000) 1 23300 (66700) 2 25800 (40900) 3 292143 251243 4 5800 257043

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