Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? WACC = 10% Year 0 1 2 3 4 Cash flows - $950 $525 $485 $445 $405 1.61 years 1.79 years 1.99 years 2.22 years 2.44 years

2.22 years

Explanation:

For discounted payback period, find the PV of each year's cashflow;

Year PV of CF Net CF

0 - 950 - 950

1 525/1.1 = 477.2727 - 472.7273

2 485/1.1² = 400.8264 - 71.9009

3 445 / 1.1³ = 334.3351 262.4342

Discounted payback = last year with negative Net CF + (Absolute net CF that year / PV of CF the following year)

= 2 + (71.9009/334.3351)

= 2 + 0.215

= 2.22 years