Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 1–2 0 3–5 $915,000 6–9 $1,470,000 a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.) The payback for the project ___ is years, and the discounted payback period is ____ years. b. What is the NPV for the project? Should the firm go ahead with the project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round intermediate calculations to 0 decimal places, e.g. 1,525 and final answer to 2 decimal places, e.g. 15.25.) The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). c. What is the IRR, and what would be the decision based on the IRR? (Round answer to 3 decimal places, e.g. 15.256%.) The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)?
Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 1–2 0 3–5 $915,000 6–9 $1,470,000 a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.) The payback for the project ___ is years, and the discounted payback period is ____ years. b. What is the NPV for the project? Should the firm go ahead with the project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round intermediate calculations to 0 decimal places, e.g. 1,525 and final answer to 2 decimal places, e.g. 15.25.) The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). c. What is the IRR, and what would be the decision based on the IRR? (Round answer to 3 decimal places, e.g. 15.256%.) The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
Section: Chapter Questions
Problem 19P
Related questions
Question
Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows.
| Years | CF | |
| 1–2 | 0 | |
| 3–5 | $915,000 | |
| 6–9 | $1,470,000 |
a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.)
| The payback for the project ___ is years, and the discounted payback period is ____ years. |
b. What is the
| The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). |
c. What is the
| The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)? |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub