[The following information applies to the questions displayed beladProject Y requires a $321,000 investment for new machinery wityy vifour-year life and no salvage value. The projectyieldowing annual results. Cash flows occur evenly withit veach year. (Annual AsountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation-MachinerySelling, general, and administrative expensesIncone2. Determine Project Y's payback periodProject YProject YNumerator:Initial investment$3. Compute Project Y's accounting rate of returnNot present valuePayback PeriodTDenominator:7 Annual net cash flowNumerator321,000 $180,000Accounting Rate of ReturnDenominatorNet Cash FlowsPresent Valueof Annuity at aProject Y$ 375,00080,2504. Determine Project Y's net present value using 7% as the discount rate. (Do not round intermediate calculations. Round yourpresent value factor to 4 decimals and final answers to the nearest whole dollar)S$ 99,750Payback Period1.78 yearsAccounting Rate of ReturnPresent Value of Net

Capital budgeting The process that involves the allocation of funds into a firm's long-term…

2. Determine Project Y's payback period Project Y Numerator: Initial investment $ Payback Period 1 Denominator: Annual net cash flow 321,000/ S 3. Compute Project Y's accounting rate of return 180,000 Accounting Rate of Return Payback Period 1.78 years

2. Determine Project Y's payback period Project Y Numerator: Initial investment $ Payback Period 1 Denominator: Annual net cash flow 321,000/ S 3. Compute Project Y's accounting rate of return 180,000 Accounting Rate of Return Payback Period 1.78 years

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: 1. Calculate the net present value of this project. (Future Value of $1. Present Value of $1. Future…

A: Net Present Value (NPV) is the difference between the present value of cash inflows and the present…

Q: Park Company is considering an investment of $31,500 that provides net cash flows of $13,200…

A: The payback period represents the time period taken by the business to recover its investment. The…

Q: Porter Company is analyzing two potential Investments. Project X $ 75,900 Initial investment Net…

A: Introduction:-Payback period method : It is the time taken for the cash flow of incomes for a…

Q: Cash Flow Cash Flow Year 0 (A) -$360,000 (B) -$56,000 1 47,000 28,000 2 67,000 24,000 3 67,000…

A: Payback period is the time period required to recover initial investment of the projects and do not…

Q: A project has the following cash flows: Year ON 3 2 Project Cash Flows -$5,987.00 $2,456.00…

A: YearCash flow0-$5,987.001$2,456.002$2,456.003$2,456.004$2,456.00Cost of capital = 10%

Q: Which projects should the company accept? Check all that apply: Project C Project A Project B Submit

A: Honor Code: Since you have posted a question with multiple subparts we will solve only the first…

Q: Probabilities for net cash flows for 3 years of a project are as follows: Year 1 Year 2 Year 3 Cash…

A: The expected cash flow is the given cash flow times the respective probability.

Q: 2. A project has a period of payback as 3 years, with an initial investment of $80,000 Year Cash…

A: If cash flows are uneven: Payback Period = Year before full recovery of initial investment +…

Q: Assume that Project A has the cash flows listed below and a relevant cost of capital of 13 percent.…

A: NPV is a Financial metric used to calculate the present value of future cash flows. It is a popular…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$…

Q: For a project with an initial investment of $30,000 and cash inflows of $12,000 a year for three…

A: Time Value of Money :— According to this concept, value of money in present day is greater than the…

Q: Internal Rate of Return A project is estimated to cost $384,572 and provide annual net cash flows…

A: While choosing which investment should be undertaken, different techniques are used. Techniques used…

Q: Calculate the internal rates of return of the following investment: Net investment -$1,100 Year 0…

A: IRR is one of the capital budgeting techniques that is used for evaluating various investment…

Q: A project is estimated to cost $421,596 and provide annual net cash flows of $84,000 for 10 years.…

A: Discount factor = Initial investment / annual net cash flows = $421,596 / $84,000 = 5.019

Q: Francoeur Co. has identified an investment project with the following cash flows: Year 1 2 3 4 Cash…

A: PV refers to the current worth of a sum of money that is to be received or paid in the future,…

Q: Compute the payback period for an investment with the following net cash flows. (Round your answer…

A: >Payback period is the amount of time it will take to get the money invested back. >It is…

Q: Problem -1-: Here are the projected cash inflows from a proposed investment: Years 1 2 3 4…

A: Payback Period = Years before full recovery + (unrecovered cost at the start of the year/ cashflow…

Q: Porter Company is analyzing two potential investments Project X $ 75,900 Initial investment Net cash…

A: Payback period = Initial investment/Annual cash inflows

Q: Consider the following investment projects.Year (n) Net Cash FlowProject 1 Project 20 -$1,200…

A: Internal Rate of return: Internal Rate of Return can be defined as a financial measure used to…

Q: Discount Rate 12% Investment Project Cash Flow Total Net Cash Flow Initial Investment $…

A: Payback Period and NPV are both used to make decision for accepting an investment proposal but…

Q: A project has the following cash flows. What is the internal rate of return? Years Cash flow…

A: Solution:- Internal Rate of Return (IRR) is the rate of return which the bank is yielding. At IRR,…

Q: There is a project with the following cash flows: Year Cash Flow -$ 23,750 1 6,900 TI 2 8,000 3…

A: The payback period represents the period for recovering back the initial investments. It is…

Q: Year Cash Flow (A) Cash Flow (D) $- -$ 0 348,000 51,000 1234 47,000 24,200 67,000 22,200 19,700…

Q: der the following two mutually exclusive projects: Cash Flow (A) Cash Flow (B) Year -$ -$ 0 354,000…

A: This question is related to capital budgeting. Here two mutually exclusive projects are given. Hence…

Q: Investment required Present value of cash inflows Net present value Life of the project Internal…

A: The concept of net present value is used to determine the current worth of all projected future cash…

Q: Calculate the internal rates of return of the following investment: Net investment -$1,000 Year 0…

A: Initial investment (I) = $1000 Cash flow in year 1 (CF1) = $6000 Cash flow in year 2 (CF2) = -…

Q: (IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $12,000…

A: The internal rate of return is the discount rate at which the net present value of a project is…

Q: Cash Payback Period A project has estimated annual net cash flows of $46,500. It is estimated to…

A: Payback period refers to the time period that is required to recover the initial cost. With the help…

Q: (IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $10,000…

A: IRR is the rate at which an investment breaks even in terms of expected returns.Key points about…

Q: At a required rate of return of 15.0%, Project B's present value is obviously higher than that of…

A: Present value is defined as the current value of an amount or sum of money to be received at some…

Q: Fuente, Incorporated, has identified an investment project with the following cash flows. Cash Flow…

A: The objective of the question is to calculate the future value of cash flows at different discount…

Q: Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Cash Flow…

A: The payback period is the time to recover the cost of the investment.

Q: A project has the following cash flows. What is the payback period? Year 0 1 2 3 Cash Flow -…

A: YearsCash flowsYear-0($5,000)Year-1$2,700Year-2$3,300Year-3$1,400Required:Payback Period =?

Q: You are given the following information about the cash flows for Projects A and B: Project B…

A: The NPV is a measure of the profitability of a project by discounting future cash flows at an…

Q: Internal Rate of Return A project is estimated to cost $248,144 and provide annual net cash flows…

A: Internal rate of return is the rate at which the present value of cash inflows is equal to the…

Q: Payback period. Given the cash flow of two projects—A and B—and using the payback period decision…

A: Payback period is a capital budgeting decision criteria in which projects are selected based on the…

Q: The following are the cash flows of two projects: Year Project A Project B 0 $ (390 ) $ (390…

A: Payback period for project A and Project B is 1.8 years and 1.3 years. Computation of payback…

Q: Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the…

A: Calculation of Payback Period:The payback period is 2.48 years.The project should be Accepted since…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$…

A: Payback period (PBP) refers to the period or duration within which the company is able to recover…

Q: IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $8,000…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Year Cash Flow (A) Cash Flow (B) 0 −$ 417,000 −$ 36,000 1 48,000 19,600 2 58,000 14,100 3 75,000…

A: The payback period refers to the time it takes a project to recover its initial costs. It does not…

Q: Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the…

A: YearsCash flowsYear-0($1,000)Year-1$350Year-2$480Year-3$520Yeat-4$300Year-5$100Required:Payback…

Q: Cash Payback Period A project has estimated annual net cash flows of $49,500. It is estimated to…

A: Pay back period means time taken to recover the cost of the investment. The lesser payback period…

Q: Consider the following two projects: Project A B C. 1.7% d. Year 0 Cash Flow -100 -73 17.3% Year 1…

A: Incremental IRR Increment investment=Investment A-Investment B=100-73=$27 Incremental cash…

Q: Year 0 Cash Flow - 100 -73 Year 1 Cash Flow Year 2 Cash Flow 40 30 ack period for project A is…

A: Payback period of any project is time required to recover initial investment of projects done.

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 1 2…

A: Payback and discounted paybacks are capital budgeting tools. Payback period is the time period that…

Q: Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4…

A: Capital budgeting techniques are used by businesses to evaluate and prioritize potential investments…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 8 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Compute the Internal Rate of Return for a project with the following cash flows: Year Cash Flow 0 ($2,000) 1 $500 2 $400 3 $400 4 $1,500 Question 7 options: 7% 40% 12% 8%
Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment Year 1 2 3 4 Year 1 2 The wind turbines require an investment of $513,900, while the biofuel equipment requires an investment of $1,093,320. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest 12% 0.893 1.690 2.402 3.037 3.605 3 4 5 Wind Turbines 6 7 8 9 10 Required: $180,000 180,000 180,000 180,000 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 $360,000 360,000 360,000 360,000 5.759 6.145 4.111 4.564 4.968 5.328 5.650 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 1a. Compute the net present value for each project. Use…
Cash Payback Period A project has estimated annual net cash flows of $37,500. It is estimated to cost $127,500. Determine the cash payback period. Round your answer to one decimal place. years
What is the net present value of a project with the following cash flows if the discount rate is 15 percent? Year 0: Cash Flow 5-48,000, Year 1: Cash flow = $15,600, Year 2: Cash flow = $28,900, Year 3: Cash flow = 515, 200 Seleccione una: A. -$1,618.48 B. $1,035.24 C. S9.593.19 D $2,687.98 E. $1,044.16
Use the table for the question(s) below. Consider the following two projects: Year 0 Project Cash Flow A - 100 40 50 B - 73 30 30 The payback period for project A is closest to: OA. 2.0 years O B. 2.4 years C. 2.2 years O D. 2.5 years Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow 60 30 Year 4 Cash Flow N/A 30 Discount Rate .15 .15
Annual cash inflows that will arise from two competing investment projects are given below: Investment A $ 3,000 4,000 5,000 6,000 $ 18,000 Year 1 2 3 4 The discount rate is 10% Click here to view Exhibit 148 1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables Required: Compute the present value of the cash inflows for each investment Year 1234 S S Investment B $6,000 5,000 4,000 3,000 $18,000 Present Value of Cash Flows Investment A 300 300 $ Investment B
Cash Payback Period A project has estimated annual net cash flows of $39,500. It is estimated to cost $201,450. Determine the cash payback period. Round your answer to one decimal place.
the project's net cash flow is listed as follows. Please calculate its simple payback period and discounted payback period (i=10%). End of 2 3 4 1 5 Year $12 $11 $10 $10 $9, ,00 ,00 ,00 Net -$4 Cash 2,00 ,00 00 Flow
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$425,000 44,000 62,000 79,000 540,000 -$40,000 20,400 13,300 18,600 15,400 2 4 The required return on these investments is 10 percent. a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A years years % Project B % d. Project A…
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years b. An initial outlay of $13,000 resulting in a single free cash flow of $47,031 after 14 years c. An initial outlay of $13,000 resulting in a single free cash flow of $110,851 after 23 years d. An initial outlay of $13,000 resulting in a single free cash flow of $13,624 after 4 years a. What is the IRR of a project with an initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years? % (Round to two decimal places.)
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $11,000 resulting in a single free cash flow of $16,992 after 9 years b. An initial outlay of $11,000 resulting in a single free cash flow of $53,871 after 14 years c. An initial outlay of $11,000 resulting in a single free cash flow of $110,943 after 24 years d. An initial outlay of $11,000 resulting in a single free cash flow of $13,692 after 5 years a. What is the IRR of a project with an initial outlay of $11,000 resulting in a single free cash flow of $16,992 after 9 years? % (Round to two decimal places.)
The following table contains the estimated cash flows of a project. Assume the appropriate discount rate (hurdle rate) is 14%. Year Operating Cash Flow 0 -$20,000 1 $7,000 2 $8,000 3 $9,000 4 $4,000 a. What is the payback period of project 1?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS