In: Finance

Calculate Payback period, Net Present Value and Benefit Cost Ratio

Period | 0 | 1 | 2 | 3 | 4 | 5 |

Year | 2,019 | 2020 | 2021 | 2022 | 2023 | 2024 |

Cash Flows | -30,000 | 11,000 x .8929 = 9821.9 | 14,000 x .7972 = 11,160.8 | 10,000 x .7118= 7,118 | 7,000 x .6335 = 4434.5 | 12,000 x .5674 = 6808.8 |

Payback Period = | A + | B |

C |

Where,

*A* is the last period number with a negative cumulative
cash flow;

*B* is the absolute value (i.e. value without negative sign)
of cumulative net cash flow at the end of the period A; and

*C* is the total cash inflow during the period following
period A

Payback Period = 2 + (5,000/10,000)

= 2 + 0.5

= 2.5 Years

Benifit Cost Ratio = Discounted value of incremental benefits ÷ Discounted value of incremental costs

= 39,359 ÷ 30,000

= 1.31

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 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

Please Calculate the WACC, the discounted payback period, and
the net present value for the following scenario. Show all work and
clearly show how you came to your answers.
A municipal stadium owned by a city stadium authority is
thinking about updating it's grass field to turf. New turf will
cost $750,000. A local company has offered to give you $100,000 to
put their logo on the turf, which you will happily take if you
decide to go forward with...

Calculate the net present value, internal rate or return and
payback period for an investment project with the following cash
flows using a 5 percent cost of capital:
Year
0
1
2
3
Net Cash Flow
-$150,000
$62,000 $62,000 $62,000
Do you recommend the investment?

Calculate the payback period, net present value, profitability
index, and internal rate of return for Project A. Assume a discount
rate of 20%. Should the firm accept or reject Project A? Explain.
If the firm must choose between Project A and Project B, which is
the better choice? Explain. Under what circumstances should the
modified internal rate of return be used instead of the standard
internal rate of return?
Project A
Project B
Year
Cash Flow
Year
Cash Flow
0...

MANAGERIAL ECONOMICS (4)
What is the main difference between payback period and
the net present value methods of capital budgeting? Why should the
time value of money be considered in evaluating projects? Give
examples. Explain extensively.

Net Present Value and Other Investment Criteria
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?...

·How do you calculate Payback Period, Net Present Value (NPV),
Internal Rate of Return (IRR), and Modified Internal Rate of Return
(MIRR) for a given project and evaluate projects using each method?
Explanation and example.

Net present value Using a cost of capital of
11%, calculate the net present value for the project
shown in the following table and indicate whether it is
acceptable,
Initial investment
(CF
0CF0)
negative 1 comma 143 comma 000−1,143,000
Year
(t)
Cash inflows
(CF Subscript
tCFt)
1
$81,000
2
$138,000
3
$193,000
4
$258,000
5
$311,000
6
$377,000
7
$270,000
8
$98,000
9
$45,000
10
$29,000
The net present value (NPV) of the project is _____$ (Round
to the nearest...

For the following two projects, determine the
Payback Period
Discounted Payback
Net Present Value
Profitability Index (Benefit-Cost Ratio)
Internal Rate of Return
Modified Internal Rate of Return
Project A
Project B
Year
Net Income
Cash Flow
Net Income
Cash Flow
0
(15,000)
(19,000)
1
5,000
6,000
3,000
4,000
2
5,000
6,000
5,000
6,000
3
5000
6,000
7,000
8,000
4
5,000
6,000
11,000
12,000
Risk Index
1.80
.60
The firm’s cost of capital ko is 15% and the risk
free...

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