8. Assume a $90,000 investment and the following cash flows for two alternatives: Year 1 2 3 4 5 Investment Investment A B $25,000 30,000 25,000 19,000 25,000 $40,000 40,000 28,000 a. Calculate the payback for Investments A and b. If the inflow in the fifth year for Investment A was $25,000,000 instead of $25,000, would your answer change under the payback method?

8. Assume a $90,000 investment and the following cash flows for two alternatives: Year 1 2 3 4 5 Investment Investment A B $25,000 30,000 25,000 19,000 25,000 $40,000 40,000 28,000 a. Calculate the payback for Investments A and b. If the inflow in the fifth year for Investment A was $25,000,000 instead of $25,000, would your answer change under the payback method?

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

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Fuente, Incorporated, has identified an investment project with the following cash flows. Cash Flow $700 925 1,125 1,250 Year 1 2 3 4 a.lf the discount rate is 11 percent, what is the future value of these cash flows in year 4? Future value at 11% b.What is the future value at a discount rate of 18 percent? Future value at 18%
Consider the following two mutually exclusive projects: Cash Flow (A) Cash Flow (B) -$ 215,000 34,000 -$ 57,000 32,900 45,000 24,300 18,300 51,000 270,000 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: 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? Year 0 WNIO 1 2 3 4 Note: 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? Note: 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? Note: 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 Project B d.…
s. Subect :- Accounting
Payback period. Given the cash flow of two projects—A and B—and using the payback period decision model, which project(s) do you accept and which project(s) do you reject if you have a three-year cutoff period for recapturing the initial cash outflow? For payback period calculations, assume that the cash flow is equally distributed over the year. Cash Flow A B Cost $14,000 $110,000 Cash flow year 1 $5,600 $44,000 Cash flow year 2 $5,600 $33,000 Cash flow year 3 $5,600 $22,000 Cash flow year 4 $5,600 $11,000 Cash flow year 5 $5,600 $0 Cash flow year 6 $5,600 $0
For the following stream of free cash flows, calculate the payback period and indicate whether you would invest in the project with a four year maximum allowable payback period. Year Free Cash Flows 0 -45,452 3.8 years; Invest 3.8 years; Do not invest 4.8 years; Invest 4.8 years; Do not invest 1 10,005 2 14,921 3 12,537 4 10,452 5 21,455
Suppose a project has the following cashflows and the discount rate (required return) is 12%. t 0 1 2 3 4 5 $ Cash flow (30,000) 8,000 10,000 12,000 16,000 12,000 The project's discounted cumulative cashflow turns positive between year 3 and 4, to be precise it is 3.59 The project's discounted cumulative cashflow turns positive between year 3 and 4, to be precise it is 3.62 The project's discounted cumulative cashflow turns positive between year 3 and 4, to be precise it is 3.12 The project's discounted cumulative cashflow turns positive between year 4 and 5, to be precise it is 4.22
An investment project has annual cash inflows of $6,000, $7,100, $7,900 for the next four years, respectively, and $9,200, and a discount rate of 16 percent. What is the discounted payback period for these cash flows if the initial cost is $9,500? (Do not round your intermediate calculations.) Multiple Choice 3.64 years O 1.82 years O 2.57 years O 0.82 years O 1.32 years
Required: Complete Solution
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period
An investment project has annual cash inflows of $4,400, $3,900, $5,100, and $4,300, for the next four years, respectively. The discount rate is 14 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,700? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period for these cash flows if the initial cost is $7,800? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period for these cash flows if the initial cost is $10,800? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Discounted payback period years b. Discounted payback period years C. Discounted payback period years
You are considering the purchase of an investment that would pay you $5,000 per year for Years 1-5, $3,000 per year for Years 6-8, and $2,000 per year for Years 9 and 10. If you require a 14%, and the cash flows occur at the end of each year, what is the modified internal rate of return if the initial outlay is $10,000 and the cash flows are reinvested at the required rate of return? 14% 23% 28% 46%
Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF Part a Determine the ERR for this project. 0 1 2 3 4 5 6 % -$50 $32 $32 $32 $32 $32 $32 Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.

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