Adequate information: Year Project B Project D 0 -$850 -$1,700 1 $670 $1,300 2 $510 $750 3 $90 $350 Discount rate = 10% To determine: The project that should be chosen based on the payback period. Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

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Answer 1

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Students have asked these similar questions

SNA company management is considering two competing investment Projects A and B. Year Project A Project B Initial Investment 1000 1000 1 275 300 2 275 300 3 275 300 4 275 300 5 275 300 DISCOUNT RATE 3.15% help management to choose the most desirable Project .You must use each technique from 1 to 4 and get the answer? 1)Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique.

The Weiland Computer Corporation is trying to choose between the following mutually exclusive design projects, P1 and P2: Year 0 1 2 3 Cash flows (P1) -$53,000 27,000 27,000 27,000 Cash flow (P2) -$16,000 9,100 9,100 9,100 If the discount rate is 10 percent and the company applies the profitability index (PI) decision rule, which project should the firm accept? If the firm applies the Net Present Value (NPV) decision rule, which project should it take? Are your answers in (a) and (b) different? Explain why?

A. Estimate the free cash flow to the firm for each of the 4 years. B. Compute the payback (using free cash flows) period for investors in the firm. C. Compute the net present value and internal rate of return to investors in the firm.Would you accept the project? Why or why not? D. How will you incorporate this information in your existing analysis? Compute the newFCF side costs and benefits. Calculate the new NPV and IRR. Would you accept the project? Using A, B C with the first picture.

Answer 2

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Answer 3

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Answer 4

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Answer 5

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 6

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

Answer 7

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

Answer 8

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 9

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 10

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 11

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 12

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 13

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQ Ch. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQ Ch. 5 - Prob. 8CQ Ch. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...

Solution Summary: The author calculates the payback period of a project based on the initial investment recovered from the net cash inflows.

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Chapter 5 Solutions

Year	Project B	Project D
0	-$850	-$1,700
1	$670	$1,300
2	$510	$750
3	$90	$350