Question

In: Finance

Britney Javelin Company is considering two investments, both of which cost $24,000. The cash flows are...

Britney Javelin Company is considering two investments, both of which cost $24,000. The cash flows are as follows: Use Appendix B and Appendix D.

Year Project M Project N
1 $9,000 $8,000
2 10,000 9,000
3 10,000 15,000

a. Calculate the payback period for project M and project N. (Round the final answers to 2 decimal places.)

  

     Payback period
Project M years
  Project N years

b-1. Calculate the NPV for project M and project N. Assume a cost of capital of 8 percent. (Round "PV Factor" to 3 decimal places. Round the intermediate and final answers to the nearest whole dollar.)

Net present value
  Project M $   
  Project N $   

b-2. Which of the two projects should be chosen based on the NPV method?

  • Project M

  • Project N

  • Both

c.  Should a firm normally have more confidence in answer derived based on NPV method or Payback method?

  • NPV method

  • Pay back method

Solutions

Expert Solution


Related Solutions

Britney Javelin Company is considering two investments, both of which cost $22,000. The cash flows are...
Britney Javelin Company is considering two investments, both of which cost $22,000. The cash flows are as follows: Use Appendix B and Appendix D. Year Project M Project N 1 $8,000 $7,000 2 12,000 11,500 3 8,000 13,000 a. Calculate the payback period for project M and project N. (Round the final answers to 2 decimal places.)         Payback period Project M years   Project N years b-1. Calculate the NPV for project M and project N. Assume a cost...
Britney Javelin Company is considering two investments, both of which cost $18,000. The cash flows are...
Britney Javelin Company is considering two investments, both of which cost $18,000. The cash flows are as follows: Use Appendix B and Appendix D. Year Project M Project N 1 $7,000 $6,000 2 8,000 7,000 3 7,000 12,000 a. Calculate the payback period for project M and project N. (Round the final answers to 2 decimal places.) Payback period Project M years Project N years b-1. Calculate the NPV for project M and project N. Assume a cost of capital...
Britney Javelin Company is considering two investments, both of which cost $46,000. The cash flows are...
Britney Javelin Company is considering two investments, both of which cost $46,000. The cash flows are as follows: Use Appendix B and Appendix D. Year Project M Project N 1 $24,000 $19,000 2 19,000 23,000 3 16,000 20,000 a. Calculate the payback period for project M and project N. (Round the final answers to 2 decimal places.)         Payback period Project M ? years   Project N ? years b-1. Calculate the NPV for project M and project N. Assume...
X-treme Vitamin Company is considering two investments, both of which cost $48,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $48,000. The cash flows are as follows: Year Project A Project B 1 $ 52,000 $ 48,000 2 21,000 25,000 3 20,000 26,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)    a-2. Which of the two projects should be...
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are as follows: Year Project A Project B 1 $ 23,000 $ 20,000 2 10,000 9,000 3 10,000 15,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)    a-2. Which of the two projects should be...
X-treme Vitamin Company is considering two investments, both of which cost $12,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $12,000. The cash flows are as follows: Year Project A Project B 1 $ 13,000 $ 12,000 2 5,000 4,000 3 6,000 11,000 a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)    b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round...
X-treme Vitamin Company is considering two investments, both of which cost $11,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $11,000. The cash flows are as follows: Year Project A Project B 1 $ 15,000 $ 11,000 2 6,000 6,000 3 5,000 10,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) a-2. Which of the two projects should be chosen...
X-treme Vitamin Company is considering two investments, both of which cost $12,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $12,000. The cash flows are as follows: Year Project A Project B 1 $ 13,000 $ 12,000 2 5,000 4,000 3 6,000 11,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)    Payback Period Project A year(s) Project B year(s)...
X-treme Vitamin Company is considering two investments, both of which cost $14,000. The cash flows are...
X-treme Vitamin Company is considering two investments, both of which cost $14,000. The cash flows are as follows: Year Project A Project B 1 $ 16,000 $ 14,000 2 6,000 5,000 3 4,000 9,000 a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) Payback Period Project A year(s) Project B year(s) a-2. Which of the two projects should be chosen based on the payback method?    Project A Project B b-1....
Grand Vitamin Company is considering two investments, each of which costs $15,000. The cash flows are...
Grand Vitamin Company is considering two investments, each of which costs $15,000. The cash flows are below.   Compute the payback period for each. Year Project A Project B 1 $22,000 $7,500 2 18,000 7,500 3 16,000 8,000 2. Which of the two projects in Problem 2 should be chosen based on the net present value method? Assume a cost of capital of 10 percent.  To earn credit, show both of your NPV answers. 3. The Tom Corp wants to know its...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT