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

Calculate? (a) net present? value, (b) payback? period, (c)
discounted payback? period, and? (d) internal rate of return.
Cost of the equipment
$166,000
Reduced labor costs
$45,000
Estimated life of the equipment
10
years
Terminal disposal value
?$0
?After-tax cost of capital
12
?%
Tax rate
20
?%
Assume depreciation is calculated on a? straight-line basis for
tax purposes. Assume all cash flows occur at? year-end except for
initial investment amounts.
Calculate? (a) net present? value, (b) payback? period, (c)...

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...

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

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?

Net
Present Value ApproachB7:H23
Time Period
0
1
2
3
4
5
Cash Flow
Purchase Price
$ (70,000)
Labor Savings
20,000
20,000
20,000
20,000
20,000
Paint Savings
2,000
2,000
2,000
2,000
2,000
Maintenance
-1000
(1,000)
(1,000)
(1,000)
(1,000)
(1,000)
Residual Value
5,000
5,000
Total Cash Flow
$ (70,000)
21,000
21,000
21,000
21,000
26,000
PV Factor
1
0.893
0.797
0.712
0.636
0.567
Total Cash Flow
$ (70,000)
$ 18,753
$ 16,737
$ 14,952
$ 13,356
$ 14,742
Required Rate of Return...

Considering discount rate of 14%, calculate NPV, Benefit Cost
Ratio, and Present Value Ratio for the following investment and
explain if it is a good investment.
C=10,000
C=8,000
C=6,000
I=7,500
I=7,500
...
I=7,500
L=10,000
0
1
2
3
4
...
10
C: Cost, I:Income, L: Salvage value

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...

between net present value rule used in cost benefit analysis and
benefit-ratio used in cost-effectiveness analysis. Why do most
economists choose net present value rule?
fix
：“benefit ratio ” is “benefit-cost ratio”

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.

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