ZuoTi.Pro
Question

We have examined five basic methods for evaluating the financial profitability of a single project: PW,...

We have examined five basic methods for evaluating the financial profitability of a single project: PW, AW, FW, IRR, and ERR. These methods lead to the use of simple decision rules for economic evaluation of projects. Discuss the two supplemental methods for assessing a project's liquidity: the simple payback period and the discounted payback period. Pick one and describe what the advantages and disadvantages would be in comparison to the other option.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer: PW, AW, FW, IRR, and ERR. Payback for evaluating is a traditional method for evaluating financial investments. It is defined as the number of years required to recover or get back the funds invested in a project. Simple payback is computed by dividing the initial investment by the annual cash inflow. The acceptance rule for payback method: If the payback period calculated for a project is less than the maximum, accept the project. It gives the highest ranking to the project which has the shortest payback period and the lowest ranking to the project which has the longest payback pxeritxi. Discounted payback discounts the cash flows. The period taken for recovering the present value of investment outlay is called discounted payback method. The advantage of discounted payback over the simple payback is that it takes into account the present value of cash flows. The disadvantage of this method is the same as for simple payback - it does not consider cash inflows after the payback period.

0 0
Add a comment
Know the answer?
Add Answer to:
We have examined five basic methods for evaluating the financial profitability of a single project: PW,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Your first assignment in your new position as assistant financial analyst at Caledonia Products is to...

    Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new​ capital-budgeting proposals. Because this is your first​ assignment, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of the​ capital-budgeting process. This is a standard procedure for all new financial analysts at​ Caledonia, and it will serve to determine whether you are moved directly into the​...

  • Which of the following criteria should be used to choose a project if there is a...

    Which of the following criteria should be used to choose a project if there is a conflict between two mutually exclusive projects? A. The project whose payback period is equal to the expected years required to recover the original investment should be chosen. B. The project whose internal rate of return is higher than its modified internal rate of return should be chosen. C. The project whose discounted payback period is longer than its traditional payback period should be chosen....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT