Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent and the maximum allowable payback is four years. Time: 1 2 3 4 5 Cash flow: -1,00e -75 100 100 2,000 Multiple Cholce 4.4375 years, reject 4.78 years, accept 3.4375 years, accept 3.78 years, reject

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent and the maximum allowable payback is four years. Time: 1 2 3 4 5 Cash flow: -1,00e -75 100 100 2,000 Multiple Cholce 4.4375 years, reject 4.78 years, accept 3.4375 years, accept 3.78 years, reject

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

See similar textbooks

Similar questions

Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years): The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital. (1) What is each projects initial NPV without replication? (2) What is each projects equivalent annual annuity? (3) Apply the replacement chain approach to determine the projects extended NPVs. Which project should be chosen? (4) Assume that the cost to replicate Project T in 2 years will increase to 105,000 due to inflation. How should the analysis be handled now, and which project should be chosen?
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is 3 years. Time: 2. Cash flow: -2,000 300 650 006 725 000 Multiple Choice 2.21 years, Accept 3.21 years, Reject 3.21 years, Accept 2.21 years, Reject < Prev. 14 of 18 MacBook Air
Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,300 $870 $870 $780 $560 $360 Should the project be accepted or rejected?multiple choice accepted rejected
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is 4 years. Time: 0 1 2 3 4 5 Cash flow: -2,700 850 650 900 825 525 Multiple Choice 2.36 years, Accept 2.36 years, Reject 3.36 years, Reject 3.36 years, Accept
compute the discounted payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable discounted payback is three years. Time: 0 1 2 3 4 5 Cash flow: -1,000 500 480 400 300 150 Multiple Choice ___ 2.49 years, accept ___ 3.49 years, reject ___ 4.98 years, reject ___ 2.98 years, accept
Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$1,300 $470 $570 $580 $360 $160 Payback: In years? Should the project be accepted or rejected?multiple choice accepted rejected
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable payback is 3 years. Time: 0 1 2 3 4 5 Cash flow: -2,600 400 700 900 800 650
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is 4 years. Time: 0 1 2 3 4 5 Cash flow: -2,700 850 650 900 825 525 rev: 12_06_2012 Multiple Choice 3.36 years, Reject 2.36 years, Accept 3.36 years, Accept 2.36 years, Reject
Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is 3 years. Time: 0 1 2 3 4 5 Cash flow: -980 480 500 420 320 170