1. The cash flows associated with an investment project are as follows: Initial Outflow -$70,000 Year...
1. The cash flows associated with an investment project are as follows:
Initial Outflow
-$70,000
Year 1
$20,000
Year 2
$30,000
Year 3
$30,000
Year 4
$30,000
a) What’s the payback period of the project? If a firm’s cutoff payback period is 3 years, should it accept the project?
b) If a firm uses discounted payback with a 15% discount rate and a 3-year cutoff period, what’s the discount payback period of the project? Should the firm accept the project?
Please provide clear steps on how the answers came about. If using BAii Plus calculator, please expand on functions used.
Homework Answers
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1. The cash flows associated with an investment project are as
follows:
Initial Outflow
-$70,000
Year...
Consider the following table that shows expected annual cash flows from a proposed investment. Year Cash...
Consider the following table that shows expected annual cash flows from a proposed investment. Year Cash Flow 0 –$70 1 $20 2 $30 3 $30 4 $30 If the annual required return is 15%, what is the payback period of the project (rounded to the first decimal)? If the firm’s cutoff discounted payback period is 3 years, should it accept the project?
need question 3 answered 2. Calculating Payback (LO2) An investment project provides cash inflows of $585...
need question 3 answered
2. Calculating Payback (LO2) An investment project provides cash inflows of $585 per year for eight years. What is the project payback period if the initial cost is $1,700? What if the initial cost is $3,300? What if it is $4,900? 3. Calculating Payback (LO2) McKernan Inc. imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should they accept either of them? -$60,000 Year...
The cash flows associated with three independent projects (in millions) are as follows Net Cash Flows Proiect Alpha Project Beta Proiect Gamma Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 $1,500,000...
The cash flows associated with three independent projects (in millions) are as follows Net Cash Flows Proiect Alpha Project Beta Proiect Gamma Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 $1,500,000 $300,000 S500,000 S500,000 $400,000 $300,000 $400,000 $100,000 S200,000 $200,000 $100,000 S200,000 $7,500,000 $2,000,000 S3,000,000 S2,000,000 S1,500,000 $5,500,000 a) Calculate the payback period of each investment b) Which investments does the company accept if the cut-off payback period is three years? What if the cut-off is...
Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year: 1 2...
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....
You are looking at a new project and have estimated the following cash flows, net income...
You are looking at a new project and have estimated the following cash flows, net income and book value data: Year 0: CF = -165,000 Year 1: CF = 63,000 Year 2: CF = 70,000 Year 3: CF = 91,000 Your required return for assets of this risk is 12%. What is the NPV for this project? Following the above problem, what is the payback period of this project? If the cutoff of your company’s payback period is 3 years,...
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year...
(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...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,000 $15,000 $20,000 $25,000 $30,000 Project B ($100,000) $25,000 $25,000 $25,000 $25,000 $25,000 Project C ($450,000) $200,000 $200,000 $200,000 a) If the discount rate for all three projects is 9.5 percent, calculate the profitability index (PI) of these three projects. Which project will be accepted if the projects are mutually exclusive? b)...
A firm is considering the following projects. Its opportunity cost of capital is 10%. Cash Flows, $ Project...
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(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year...
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You are looking at a new project and have estimated the following cash flows, net income...
You are looking at a new project and have estimated the following cash flows, net income and book value data: Year O:CF = -165,000 Year 1: CF = 63,000 Year 2: CF = 70,000 Year 3: CF = 91,000 Your required return for assets of this risk is 12%. What is the NPV for this project? $10456 O $11826 O $11000 O $12115 Question 2 4 pts Following above problem, what is the payback period of this project? If the...
need question 3 answered
2. Calculating Payback (LO2) An investment project provides cash inflows of $585 per year for eight years. What is the project payback period if the initial cost is $1,700? What if the initial cost is $3,300? What if it is $4,900? 3. Calculating Payback (LO2) McKernan Inc. imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should they accept either of them? -$60,000 Year...
The cash flows associated with three independent projects (in millions) are as follows Net Cash Flows Proiect Alpha Project Beta Proiect Gamma Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 $1,500,000 $300,000 S500,000 S500,000 $400,000 $300,000 $400,000 $100,000 S200,000 $200,000 $100,000 S200,000 $7,500,000 $2,000,000 S3,000,000 S2,000,000 S1,500,000 $5,500,000 a) Calculate the payback period of each investment b) Which investments does the company accept if the cut-off payback period is three years? What if the cut-off is...
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....
(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...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,000 $15,000 $20,000 $25,000 $30,000 Project B ($100,000) $25,000 $25,000 $25,000 $25,000 $25,000 Project C ($450,000) $200,000 $200,000 $200,000 a) If the discount rate for all three projects is 9.5 percent, calculate the profitability index (PI) of these three projects. Which project will be accepted if the projects are mutually exclusive? b)...
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) $(240) 72 80 95 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.) (Discounted payback period) The Callaway Cattle Company is considering the construction of a new feed handling system for its feed lot in Abilene, Kansas. The new system will...
You are looking at a new project and have estimated the following cash flows, net income and book value data: Year O:CF = -165,000 Year 1: CF = 63,000 Year 2: CF = 70,000 Year 3: CF = 91,000 Your required return for assets of this risk is 12%. What is the NPV for this project? $10456 O $11826 O $11000 O $12115 Question 2 4 pts Following above problem, what is the payback period of this project? If the...
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