Payback period is the period after which the cumulative cash flows become positive
Project Hydrogen -
Year | CF | Cumulative |
0 | -29000 | -29000 |
1 | 6500 | -22500 |
2 | 7000 | -15500 |
3 | 7500 | -8000 |
4 | 3500 | -4500 |
5 | 3500 | -1000 |
6 | 2500 | 1500 |
The cash flow becomes positive after period 5
Hence, payback period = 5 + 1000/2500 = 5.4 years
Payback period for project Hydrogen = 5.4 years
Project Helium -
Year | CF | Cumulative |
0 | -35000 | -35000 |
1 | 8000 | -27000 |
2 | 8000 | -19000 |
3 | 7500 | -11500 |
4 | 4500 | -7000 |
5 | 6000 | -1000 |
6 | 5000 | 4000 |
The cash flow becomes positive after period 5
Hence, payback period = 5 + 1000/5000 = 5.2 years
Payback period for project Helium = 5.2 years
Since Elysian wants a payback period of less than 6 years, (c) Both projects are acceptable because their payback period are less than 6 years criterion
Eysian Fields, Inc, uses a maxmum payback period of 6 years and currenty must choose between...
Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an initial outlay of $28,000 project Helium requires an initial outlay of $34,000. Using the expected cash inflows given for each project in the following table, , calculate each project's payback period. Which project meets Elysian's standards? years. (Round to two decimal places.) The payback period of project Hydrogen is The payback period of project Helium is...
Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an initial outlay of $29,000; project Helium requires an initial outlay of $32,000. Using the expected cash inflows given for each project in the following table, EEB, calculate each project's payback period. Which project meets Elysian's standards? The payback period of project Hydrogen is years. (Round to two decimal places.) The payback period of project Helium is...
WARM-UP EXERCISES All problems are available in MyLab Finance LG@ E10-1 Elysian Fields Inc. uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an ini- tial outlay of $25,000; project Helium requires an initial outlay of $35,000. Using the expected cash inflows given for each project in the following table, calculate each project's payback period. Which project meets Elysian's standards? Year Expected cash inflows (CF) Hydrogen Helium $6,000 $7,000...
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Barones mange and is considering three Payback and discounted payback period calculations) The Bar Nana Marutacuring Commutus on punased in case food lots throughout the Mid investment projects for next year but doesn't want to make any investment that requires more than the years to recover the firm's Intl va n The cash flows for the three projects Project A, Project Band Project Care as follows: backley for the counted Gran Bar None's three-year payback period which of the prods...
(Payback and discounted payback period calculations) The Bar None Manufacturing Co manufactures fence panels used in cattle feed for throughout the Midwest Bar None's management is considering three investment projects for next year but doesn't want to make any investment that requires more than three years to recover the firm'sini Investment. The cash flows for the three projects Project A, Project, and Project C) are as follows: a. Given Bar None's three year payback period, which of the projects will...
ch requires an intial Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc, is considering two mutually exclusive projects. E nvestment of $180,000. John Shell, president of the company, has set a maximum payback period of 4 years The after-tax cash inflows associated with each project are shown in the following table: BEB a. Determine the payback period of each project b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in...
Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $180,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table: a. Determine the payback period of each project. b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in? a. The...