is a method of evaluating a project by measuring the time it will take to recover...
is a method of evaluating a project by measuring the time it will take to recover the initial investment?
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Payback period is a method of evaluating a project by measuring the time it will take to recover the initial investment
therfore answer is payback period.
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is a method of evaluating a project by measuring the time it
will take to recover...
Payback period essentially provides the number of years it would take for a project to recover...
Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. The _______ the payback, other things constant, the greater the project’s liquidity. Suppose ABC Telecom Inc.’s CFO is evaluating a project...
Payback period essentially provides the number of years it would take for a project to recover...
Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. The the payback, other things constant, the greater the project's liquidity. Suppose Omni Consumer Products's CFO is evaluating a project with...
A firm is evaluating a project with an initial investment at time 0 of $640,000. The...
A firm is evaluating a project with an initial investment at time 0 of $640,000. The present value of the levered cash flows is $729,400 and the net present value of the project is $157,000. Using the flow-to-equity method of valuation determine the amount borrowed. $89,400 $246,400 $67,600 $54,300 $64,000
1. A company is considering a project, Project A. The established time horizon to recover the...
1. A company is considering a project, Project A. The established time horizon to recover the initial capital outlay is 5 years. The projected cash flows for Project A are shown below. Project A Year I Cash Flow (S) (220,000) 60,000 2 70,000 85,000 70,000 50,000 The cost of capital for these projects is 9 percent. Required: Use the information presented to evaluate for Project A: a) Payback period b) Discounted payback period c) Net present value d) Profitability index...
Chapter 6-Making Investment Decisions Problems 1 CSC is evaluating a new project to produce encapsulators. The...
Chapter 6-Making Investment Decisions Problems 1 CSC is evaluating a new project to produce encapsulators. The project will last five years and the company uses straight-line depreciation method. The initial investment in plant and equipment is $800,000. Sales of encapsulators are forecasted at $200,000 per year. If the tax rate is 20% and the cost of capital is 15%, should CSC take this project?
The length of time required to recover the initial investment in a capital asset is known...
The length of time required to recover the initial investment in a capital asset is known as the: a. the rate of return b. payback method c. internal rate of return d. unadjusted rate of return
4. Net present value method Underwood Corp. is evaluating a proposed capital budgeting project that will...
4. Net present value method Underwood Corp. is evaluating a proposed capital budgeting project that will require an initial investment of $168,000. The project is expected to generate the following net cash flows: Year AW N< 2 Cash Flow $44,800 $51,700 $48,600 $47,900 Assume the desired rate of return on a project of this type is 11%. The net present value of this project is -25,096.03 r projects. Should Underwood Suppose Underwood Corp. has enough capital to fund the project,...
A potential pitfall to the NPV method might be: O It doesn't take into account the...
A potential pitfall to the NPV method might be: O It doesn't take into account the salvage value of old equipment. It doesn't take into account the time value of money. If we are using wages as part of our outflows, a change in the labor market that creates a steep rise in wages may make what we thought was a positive cash flow a negative cash flow. Previous Next Activity Details Task: View this topic MacBook Air If we...
Free Spirit Industries is evaluating a proposed capital budgeting project (project Sigma) that will require an...
Free Spirit Industries is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Free Spirit Industries's WACC is 8%, and project Sigma...
Falcon Freight is evaluating a proposed capital budgeting project (project Delta) that will require an initial...
Falcon Freight is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,600,000. Falcon Freight has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Falcon Freight’s WACC is 9%, and project Delta has the...
Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. The the payback, other things constant, the greater the project's liquidity. Suppose Omni Consumer Products's CFO is evaluating a project with...
1. A company is considering a project, Project A. The established time horizon to recover the initial capital outlay is 5 years. The projected cash flows for Project A are shown below. Project A Year I Cash Flow (S) (220,000) 60,000 2 70,000 85,000 70,000 50,000 The cost of capital for these projects is 9 percent. Required: Use the information presented to evaluate for Project A: a) Payback period b) Discounted payback period c) Net present value d) Profitability index...
Chapter 6-Making Investment Decisions Problems 1 CSC is evaluating a new project to produce encapsulators. The project will last five years and the company uses straight-line depreciation method. The initial investment in plant and equipment is $800,000. Sales of encapsulators are forecasted at $200,000 per year. If the tax rate is 20% and the cost of capital is 15%, should CSC take this project?
4. Net present value method Underwood Corp. is evaluating a proposed capital budgeting project that will require an initial investment of $168,000. The project is expected to generate the following net cash flows: Year AW N< 2 Cash Flow $44,800 $51,700 $48,600 $47,900 Assume the desired rate of return on a project of this type is 11%. The net present value of this project is -25,096.03 r projects. Should Underwood Suppose Underwood Corp. has enough capital to fund the project,...
A potential pitfall to the NPV method might be: O It doesn't take into account the salvage value of old equipment. It doesn't take into account the time value of money. If we are using wages as part of our outflows, a change in the labor market that creates a steep rise in wages may make what we thought was a positive cash flow a negative cash flow. Previous Next Activity Details Task: View this topic MacBook Air If we...
Free Spirit Industries is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Free Spirit Industries's WACC is 8%, and project Sigma...
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