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1. Payback period 2. Discounted Payback 3. Net Present Value (NPV)

1. Payback period 2. Discounted Payback 3. Net Present Value (NPV)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Name: Date: Score: Program-Year-Section: Professor: Set A Exercise II Henry Corporation is taking into consideration on expanding its operation. The expansion needs new computerized equipments which last for five years. A cash outflow of P2,000,000.00 is necessary for the procurement of new equipments. The prevailing bank's interest rate for a 5 vear term loan is 7% per annum. The projected cash inflows from the investment for the next five years are given below: Year Cash Flow 1 P1,000,000.00 800,000.00 3 600,000.00 4 400,000.00 200,000.00 Required: By applying the following evaluation techniques, is the new investment economically acceptable? 1. Payback period 2. Discounted Payback 3. Net Present Value (NPV) 4. Profitability Index (PI) 5. Internal Rate of Return (if financial calculator is available) 6. Modified Internal Rate of Return (if financial calculator is available)
Transcribed Image Text:Name: Date: Score: Program-Year-Section: Professor: Set A Exercise II Henry Corporation is taking into consideration on expanding its operation. The expansion needs new computerized equipments which last for five years. A cash outflow of P2,000,000.00 is necessary for the procurement of new equipments. The prevailing bank's interest rate for a 5 vear term loan is 7% per annum. The projected cash inflows from the investment for the next five years are given below: Year Cash Flow 1 P1,000,000.00 800,000.00 3 600,000.00 4 400,000.00 200,000.00 Required: By applying the following evaluation techniques, is the new investment economically acceptable? 1. Payback period 2. Discounted Payback 3. Net Present Value (NPV) 4. Profitability Index (PI) 5. Internal Rate of Return (if financial calculator is available) 6. Modified Internal Rate of Return (if financial calculator is available)
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