Question

In: Finance

What is the discounted payback period on Versace's proposed investment in a new line of fashion...

What is the discounted payback period on Versace's proposed investment in a new line of fashion clothes? The expected cash flows appear below. Note that year 0 and year 1 cash flows are negative. (Answer in years; round to 2 decimals)

Year 0 cash flow = -95,000
Year 1 cash flow = -18,000
Year 2 cash flow = 50,000
Year 3 cash flow = 49,000
Year 4 cash flow = 54,000
Year 5 cash flow = 45,000
Year 6 cash flow = 46,000


Required rate of return = 14.00%

Solutions

Expert Solution

Ans 4.31 years

Year Project Cash Flows (i) DF@ 14% DF@ 14% (ii) PV of Project A ( (i) * (ii) ) Cumulative Cash Flow
0 -95000 1 1                           (95,000.00)             (95,000.00)
1 -18000 1/((1+14%)^1) 0.877                           (15,789.47)          (1,10,789.47)
2 50000 1/((1+14%)^2) 0.769                             38,473.38             (72,316.10)
3 49000 1/((1+14%)^3) 0.675                             33,073.60             (39,242.49)
4 54000 1/((1+14%)^4) 0.592                             31,972.33                (7,270.16)
5 45000 1/((1+14%)^5) 0.519                             23,371.59                16,101.43
6 46000 1/((1+14%)^6) 0.456                             20,956.98                37,058.41
NPV                             37,058.41
Discounted Payback Period = 4 years + 7270.16/23371.59
4.31 years

jeff jeffy answered 2 months ago
Next > < Previous

Related Solutions

Calculate the Payback Period and Discounted Payback Period for the following project: 1. An initial investment...
Calculate the Payback Period and Discounted Payback Period for the following project: 1. An initial investment of $20,000 with expected after-tax operating cash flows of $125,000 per year for each of the next 3 years. However, in preparation for its termination at the end of year 3, an additional investment of $350,000 must be made at the end of Year 2. Please show all work in excel.
What is the discounted payback period of the following investment if the required return is 10%?...
What is the discounted payback period of the following investment if the required return is 10%? Year Cash Flows 0 = -$90 1 = $30 2 = $35 3 = $30 4 = $25 5 = $20
Distinguish between the payback period and the discounted payback period?
Distinguish between the payback period and the discounted payback period?
What is the discounted payback period for the investment project that has the following cash flows,...
What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Year Cash Flows 0 -13779 1 4470 2 5005 3 5877 4 6626
5. What is the difference between the payback period and the discounted payback? 6. Define the...
5. What is the difference between the payback period and the discounted payback? 6. Define the Average Accounting Return (AAR). What are the disadvantages of the AAR? 7. What is the Internal Rate of Return (IRR)? What is the IRR rule? How is the IRR calculated? 8. Do the NPV rules and IRR rules lead to identical investment decisions? If so, under what circumstances?
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following...
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following after-tax cash flow projections. Also tell me whether the IRR is greater or less then the RRR. A. Year ATCF 0 $(60,000) 1 21,000 2 27,000 3 24,000 4 16,000 Assume a 16% required rate of return
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following...
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following after-tax cash flow projections. Also tell me whether the IRR is greater or less then the RRR B. Year ATCF 0 (100,000) 1 (320,000) 2 130,000 3 185,000 4 200,000 5 195,000 6 150,000 Assume a 20% required rate of return
q.1 Discounted payback period. ​Becker, Inc. uses the discounted payback period for projects costing less than​...
q.1 Discounted payback period. ​Becker, Inc. uses the discounted payback period for projects costing less than​ $25,000 and has a cutoff period of four years for these​ small-value projects. Two​ projects, R and​ S, are under consideration. Their anticipated cash flows are listed in the following table. If Becker uses a discount rate of 4 %4% on these​ projects, are they accepted or​ rejected? If it uses a discount rate of 12 %12%​? A discount rate of 18 %18%​? Why...
1: The discounted payback period will A: always be longer than the payback period. B: uses...
1: The discounted payback period will A: always be longer than the payback period. B: uses discounted cash flows C: both "A" and "B" are correct D: is the same as the payback period 2: The cost of capital is: A: another term for the market risk premium. B: another term for the risk-free rate of return. c C: the return on the overall market. D: the minimum required return on a new investment 3: A special dividend A: is...
Determine the discounted payback period of a new manufacturing process that costs $15,000,000 with an annual...
Determine the discounted payback period of a new manufacturing process that costs $15,000,000 with an annual savings of $3,800,000 going up by 3% per year at a MARR of 10% Please show all work and steps. Any help will be appreciated and thank you for your time!
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT