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Category > Management Posted 20 Jan 2018 My Price 10.00

discounted payback period

2.

An investment project costs $10,000 and has annual cash flows of $2,850 for six years.

  

What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

  

  Discounted payback period years

  

What is the discounted payback period if the discount rate is 5 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

  

  Discounted payback period years

  

What is the discounted payback period if the discount rate is 19 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16)
Discounted payback period

years

3.

YouAc€?cre trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12.4 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,894,300, $1,947,600, $1,916,000, and $1,369,500 over these four years, what is the projectAc€?cs average accounting return (AAR)? (Round your answer to 2 decimal places. (e.g., 32.16))

Average accounting return %

4.

A project that provides annual cash flows of $17,400 for ten years costs $80,000 today.

  

What is the NPV for the project if the required return is 9 percent? (Round your answer to 2 decimal places. (e.g., 32.16))

  

  NPV $

  

At a required return of 9 percent, should the firm accept this project?
 
  Accept
  Reject

  

What is the NPV for the project if the required return is 21 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))
NPV $

At a required return of 21 percent, should the firm accept this project?
 
  Accept
  Reject

At what discount rate would you be indifferent between accepting the project and rejecting it? (Round your answer to 2 decimal places. (e.g., 32.16))
  Discount rate %

5.

What is the IRR of the following set of cash flows? (Round your answer to 2 decimal places. (e.g., 32.16))

Year Cash Flow
0 Ac€?o$ 16,500  
1   7,200  
2   8,500  
3   7,000  
 
  IRR %

6. Garage, Inc., has identified the following two mutually exclusive projects:    

Year Cash Flow (A)   Cash Flow (B)
0 Ac€?o$ 29,700     Ac€?o$ 29,700  
1   15,100       4,650  
2   13,000       10,150  
3   9,550       15,900  
4   5,450       17,500  
 

  

a-1

What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  

  IRR
  Project A %
  Project B %
 

  

a-2

Using the IRR decision rule, which project should the company accept?
   
 
  Project A
  Project B
a-3 Is this decision necessarily correct?
   
 
  Yes
  No

  

b-1

If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  

  NPV
  Project A $
  Project B $
 
b-2 Which project will the company choose if it applies the NPV decision rule?
   
 
  Project A
  Project B
c.

At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)
  Discount rate %

7.Consider the following two mutually exclusive projects:

  

Year Cash Flow (A)   Cash Flow (B)
0 Ac€?o$ 345,000     Ac€?o$ 48,500  
1   50,000       24,500  
2   70,000       22,500  
3   70,000       20,000  
4   445,000       15,100  
 

  

Whichever project you choose, if any, you require a 14 percent return on your investment.

  

a-1

What is the payback period for each project? (Round your answers to 2 decimal places. (e.g., 32.16))

  

  Payback period
  Project A years  
  Project B years  
 

  

a-2 If you apply the payback criterion, which investment will you choose?
   
 
  Project A
  Project B

  

b-1

What is the discounted payback period for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  

  Discounted payback period
  Project A years  
  Project B years  
 

  

b-2 If you apply the discounted payback criterion, which investment will you choose?
   
 
  Project A
  Project B

  

c-1

What is the NPV for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  

  NPV
  Project A $   
  Project B $   
 

  

c-2 If you apply the NPV criterion, which investment will you choose?
   
 
  Project A
  Project B

  

d-1

What is the IRR for each project? (Round your answers to 2 decimal places. (e.g., 32.16))

  

  IRR
  Project A %  
  Project B %  
 

  

d-2 If you apply the IRR criterion, which investment will you choose?
   
 
  Project A
  Project B

  

e-1

What is the profitability index for each project? (Do not round intermediate calculations and round your final answers to 3 decimal places. (e.g., 32.161))

  

  Profitability index
  Project A    
  Project B     
 

  

e-2 If you apply the profitability index criterion, which investment will you choose?
   
 
  Project A
  Project B
f Based on your answers in (a) through (e), which project will you finally choose?
   
 
  Project B
 

Project A

8.

An investment under consideration has a payback of eight years and a cost of $865,900. Assume the cash flows are conventional.

If the required return is 10 percent, what is the worst-case NPV? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))
  
  Worst-case NPV $

9.

Year Cash Flow
0 Ac€?o$ 3,024  
1   17,172  
2 Ac€?o 36,420  
3   34,200  
4 Ac€?o 12,000  
 

This problem is useful for testing the ability of financial calculators and computer software. Consider the above cash flows. The IRRs, from smallest to largest, are percent, percent, percent, and percent. (Hint: search between 20 percent and 70 percent.) (Round your answers to 2 decimal places. (e.g., 32.16))

 

Answers

Maurice Tutor
(5)
Status NEW Posted 20 Jan 2018 08:01 PM My Price 10.00

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