Answer:
Payback Period = Initial Investment / Annual Cash Inflow
Project
A:
Payback Period = 310 / 140
Payback Period = 2.2 years
Project
B:
Payback Period = 310 / 210
Payback Period = 1.5 years
Problem 8-8 Payback (LO4) The following are the cash flows of two projects: Year Project A...
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) $(210) AWNO If the project's appropriate discount rate is 11 percent, what is the project's discounted payback period? The project's discounted payback period is years. (Round to two decimal places.) (Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: Project A Project B Year Cash Flow...
Problem 10-21 Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $27 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 20 2 10 10 3 15 8 4 20 6 What is the regular payback period for each of the projects? Round your answers to two...
Problem 10-21 Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 12% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 20 2 10 10 3 15 8 4 20 6 What is the regular payback period for each of the projects? Round your answers to two...
The following are the cash flows of two projects: Year Project A Project B 0 $ (260 ) $ (260 ) 1 140 160 2 140 160 3 140 160 4 140 What are the internal rates of return on projects A and B? (Enter your answers as a percent rounded to 2 decimal places.)
The following are the cash flows of two projects: Year Project A Project B 0 −$260 −$260 1 140 160 2 140 160 3 140 160 4 140 a. If the opportunity cost of capital is 11%, calculate NPV for both projects? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project NPV A $ B b. Which of these projects is worth pursuing if you...
Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year: 1 2 3 4 1,250 3,500 - 6,000 - 2,000 - 6,000 1,250 2,000 1,250 +3,500 5,500 2,500 1,250 3,500 a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1....
The following are the cash flows of two independent projects: Year Project A Project B 0 (210) (210) 1 90 110 2 90 110 3 90 110 4 90 If the opportunity cost of capital is 12%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Which of these projects is worth pursuing? Project A Project B Both Neither
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) $(210) AWNO If the project's appropriate discount rate is 11 percent, what is the project's discounted payback period? The project's discounted payback period is years. (Round to two decimal places.)
Problem 7-20 Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Spartan Rubber Company. Assume the discount rate for both projects is 9 percent. Year Dry Prepreg Solvent Prepreg 0 –$ 1,850,000 –$ 825,000 1 1,115,000 450,000 2 930,000 750,000 3 765,000 420,000 a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period Dry Prepreg years Solvent Prepreg years...
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) $(210) 85 60 95 If the project's appropriate discount rate is 12 percent, what is the project's discounted payback period? The project's discounted payback period is years. (Round to two decimal places.)