Question

In: Finance

If management requires a 3 year payback period, which project would you choose?

(Chapter 11 payback period)

year

Proj A

Proj B

Proj C

0

        (1,000)

        (10,000)

        (5,000)

1

              600

             5,000

          1,000

2

              300

             3,000

          1,000

3

              200

             3,000

          2,000

4

              100

             3,000

          2,000

5

              500

             3,000

          2,000
  1. If management requires a 3 year payback period, which project would you choose?
  1. If the discount rate is 12% and management still requires a 3 year pay back on a discounted basis, which project would you choose?

 

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

(a) If management requires projects to have a 3-year payback, would it accept either of the...
(a) If management requires projects to have a 3-year payback, would it accept either of the following two independent projects? Please explain thoroughly the calculations of payback period, by showing precise years of payback. Please show formulas in your calculations. Please do not use excel. (b) What is the NPV of project B assuming the discount rate is 14%. Please explain thoroughly your calculations. Please show formulas. Please do not use excel. (c) Sketch the NPV profile for project B....
Which of the following is true for a 5-year project with a 3-year payback period? The...
Which of the following is true for a 5-year project with a 3-year payback period? The net present value is negative. The net present value is zero. Initial screening reveals this to be an acceptable project. The net present value is positive.
1. (a) If management requires projects to have a 3-year payback, would it accept either of...
1. (a) If management requires projects to have a 3-year payback, would it accept either of the following two independent projects? Explain.    Year 0 1 2 3 4 Cash flows (A) -$55,000 19,000 19,000 19,000 19,000 Cash flows (B) -$95,000 18,000 18,000 18,000 230,013                 (b) What is the NPV of project B assuming the discount rate is 14%. (c) Sketch the NPV profile for project B. Also indicate the point when the discount rate is 37.01%. 2. A...
Which project has the better payback period? Project A requires a $25,000 investment and provides $5,000...
Which project has the better payback period? Project A requires a $25,000 investment and provides $5,000 per year for 6 years; Project B requires an $8,000 project and provides $4,000 per year for 2 years. Explain the strengths and weaknesses of this approach.
​(Discounted payback period​) You are considering a project with the following cash​ flows: YEAR   PROJECT CASH...
​(Discounted payback period​) You are considering a project with the following cash​ flows: YEAR   PROJECT CASH FLOW 0   -40,000 1   15,000 2   15,000 3   15,000 4   15,000 If the appropriate discount rate is 12 ​percent, what is the​ project's discounted payback​ period? The​ project's discounted payback period is ___ years.  ​(Round to two decimal​ places.)
A firm may choose a project with a rapid payback period rather than one with a...
A firm may choose a project with a rapid payback period rather than one with a larger net present value. Discuss the validity of this statement. paragraph answer:
A firm may choose a project with a rapid payback period rather than one with a...
A firm may choose a project with a rapid payback period rather than one with a larger net present value. Discuss the validity of this statement.
Based on Payback period, why do we choose a Project which take less years when compared...
Based on Payback period, why do we choose a Project which take less years when compared to another (Answer 1000 words)
3. Payback Period - Concerning payback: a. Describe how the payback period is calculated, and describe...
3. Payback Period - Concerning payback: a. Describe how the payback period is calculated, and describe the information this measure provides about a sequence of cash flows. What is the payback criterion decision rule? b. What are the problems associated with using the payback period to evaluate cash flows? c. What are the advantages of using the payback period to evaluate cash flows? Are there any circumstances under which using payback might be appropriate? Explain.
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.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT