Using the payback period method, you will accept a project if: its payback period is the same as the specified payback requirement. it generates the same cash flow every year. its payback period is longer than the specified payback requirement. its payback period is shorter than the specified payback requirement. it never pays back over its life.

Using the payback period method, you will accept a project if: its payback period is the same as the specified payback requirement. it generates the same cash flow every year. its payback period is longer than the specified payback requirement. its payback period is shorter than the specified payback requirement. it never pays back over its life.

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 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...

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When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)? A. so that the projects can be compared on their cost or value created per year B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter time frame C. so that you can see which project has the greatest net present value (NPV) D. to avoid complications arising from alternating cash inflows and outflows O E. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered
a) the payback period is how many years? b) the project meets/does not eat the benchmark?
Consider a project that needs an investment outlay I at time t-0, with a constant annuity as returns at the end of each year of its ten-year project lifetime. The salvage value S at the end of life is unknown. Two other things are known as well about the project. The simple payback period is 4 years, and the discounted payback period is 6 years. What is the implied MARR (minimum acceptable rate of return) for this result?
Which of the following describes the NPV decision rule? Accept if the cost of the project is recouped within 3 years. Accept if the PV of the cash inflows of the project divided by the absolute value of the cost of the project is greater than one. Accept if the PV of the cash inflows from the project minus the cost of the project is greater than zero Accept if the average net income from the project divided by the average book value is greater than the target required Accept if the rate of return earned on the project is greater than the required return for the project.
2.When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)? A. so that you can see which project has the greatest net present value (NPV) B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter timeframe C. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered D. so that the projects can be compared on their cost or value created per year
7. The NPV and payback period What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. Year Year 1 Year 2 Year 3 Year 4 If the project's weighted average cost of capital (WACC) is 10%, the project's NPV (rounded to the nearest dollar) is: O O Cash Flow $325,000 $475,000 $425,000 $475,000 0 0 $351,183 $367,146 Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Check all that apply. $319,257 $303,294 The payback period is calculated using net income instead of cash flows. The payback period does not take the project's entire life into account. The payback period does not take the…
a. They payback period of project A is ___ years (round to two decimal places) The payback period of project B is ____ years. (round to two decimal places) According to the payback method, which project should the firm choose? b. The NPV of project A is $___ The NPV of project B is $___ c. The IRR of project A is ___ The IRR of project B is ___ d. Make a reccomendation
An investment project provides cash inflows of $660 per year for eight years. a. What is the project payback period if the initial cost is $1,525? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $3,350? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $5,500? (Enter O if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Payback period b. Payback period c. Payback period years years years
4. I need help with multiple choice finance home work question All else equal, a project's NPV increases when: The discount rate increases. Each cash inflow is delayed by one year. All cash inflows occur during the last year of a project's life instead of periodically throughout the life of the project. The initial cost of a project increases. The discount rate decreases.
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. What is each project’s initial NPV without replication? What is each project’s equivalent annual annuity? Apply the replacement chain approach to determine the projects’ extended NPVs. Which project should be chosen? 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?
a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 table above. If required, round youP Pinal answer to the nearest whole percent. b. What are some uncertainties that could reduce the internal rate of return of this project?
Consider two mutually exclusive alternatives and the do-nothing approach. Project X has an initial investment of $175 and annual positive cash flows of $65 for four years. Project Y has an initial investment of $88 and annual positive cash flows of $25 for four years. Determine the following: at what interest rates Project X would be attractive? at what interest rates would Project Y be attractive? at what interest rates would it be best to do nothing.