XYZ Corp is investing in a machine which costs $100 (million) today. The machine is expected to generate net cash flow of $20 at the end of Year 1. The net cash flow will increase at the rate of 20% per year till the end of year 5, as shown below. Answer the following questions:

WACC 12% What is the discounted payback period?

 

 

(a) First compute the future cashflows. Lay them in a table similar to Practice Problem on page 2 above. Time 1 3 4 5 Cash Flow -100