Question

In: Finance

The Red Duck is considering a project with an initial cost of $42,700. The project will...

The Red Duck is considering a project with an initial cost of $42,700. The project will produce cash inflows of $8,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period?

Group of answer choices

5.24 years

2.23 years

4.23 years

3.24 years

Solutions

Expert Solution


Related Solutions

Daniel's Market is considering a project with an initial cost of $176,500. The project will not...
Daniel's Market is considering a project with an initial cost of $176,500. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $127,500 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?
The Spoon Restaurant is considering a project with an initial cost of $725,000. Then the project...
The Spoon Restaurant is considering a project with an initial cost of $725,000. Then the project will not produce any cash flows for the first two years. Starting in year three, the project will produce cash inflows of $721,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 18 percent. What is the project's net present value? Show calculations.
The Golden Goose is considering a project with an initial cost of $46,700. The project will...
The Golden Goose is considering a project with an initial cost of $46,700. The project will produce cash inflows of $10,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period?
A company is considering investing in a project with an initial cost of $250,000. The cost...
A company is considering investing in a project with an initial cost of $250,000. The cost of capital is 15%. The project will generate $100,000 every year for four years. Calculate the NPV & IRR & determine if they should invest in this project.
Beta Industries is considering a project with an initial cost of $6.9 million. The project will...
Beta Industries is considering a project with an initial cost of $6.9 million. The project will produce cash inflows of $1.52 million a year for seven years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2.2 percent. The firm has a pretax cost of debt of 9.1 percent and a cost of equity of 17.7 percent. The debt-equity ratio is .57 and the tax rate is 34 percent. What...
Alpha Industries is considering a project with an initial cost of $8.1 million. The project will...
Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. the firm has a pretax cost of debt of 5.64% and a cost of equity of 11.29%. The debt-equity ratio is .61 and the tax rate is 39 percent. A. Should the Firm accept the project? B.Calculate the Firms WACC
Aramark is considering a 3-year project with an initial cost of $570,000. The project will not...
Aramark is considering a 3-year project with an initial cost of $570,000. The project will not directly produce any sales but will reduce operating costs by $147,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $295,000. The tax rate is 25 percent and the...
Alpha Industries is considering a project with an initial cost of $7.5 million. The project will...
Alpha Industries is considering a project with an initial cost of $7.5 million. The project will produce cash inflows of $1.55 million per year for 7 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.46 percent and a cost of equity of 11.17 percent. The debt–equity ratio is .55 and the tax rate is 39 percent. What is the net present value of the project? $263,559 $482,364 $463,811 $397,552...
Alpha Industries is considering a project with an initial cost of $8.2 million. The project will...
Alpha Industries is considering a project with an initial cost of $8.2 million. The project will produce cash inflows of $1.93 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.67% and a cost of equity of 11.31%. The debt-equity ratio is 0.62 and the tax rate is 40%. What is the net present value of the project? Hint: You'll need to calculate the appropriate...
Husky Corporation is considering an investment project in Canada. The project has an initial cost of...
Husky Corporation is considering an investment project in Canada. The project has an initial cost of CAD602,000 and is expected to produce cash inflows of CAD220,000 a year for four years. The project will be worthless after four years. The risk-free rate in the United States is 2 percent and the risk-free rate in Canada is 2.4 percent. The current spot rate is CAD1 = $.742. Husky's required return on dollar investments of this type is 12 percent. What is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT