Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Eachproject will last for 3 years and produce the following cash flows.Year123TotalAA$7,600 $10,3009,60015,600(a)$32,800BBPayback period10,300Click here to view PV tables.10,300Most desirable$30,900The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with apayback period over 2.2 years. Flounder's minimum required rate of return is 12%.Least desirableCC$11,60010,6009,600Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.)$31,800AAyearsBBIndicating the most desirable project and the least desirable project using this method.yearsCCyears

The payback period is the time it takes for a project to recover its initial investment cost. It is…

(a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) Payback period AA Most desirable years BB years Indicating the most desirable project and the least desirable project using this method. CC years

(a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) Payback period AA Most desirable years BB years Indicating the most desirable project and the least desirable project using this method. CC years

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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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

Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Each
project will last for 3 years and produce the following cash flows.
Year
1
2
3
Total
AA
$7,600 $10,300
9,600
15,600
(a)
$32,800
BB
Payback period
10,300
Click here to view PV tables.
10,300
Most desirable
$30,900
The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with a
payback period over 2.2 years. Flounder's minimum required rate of return is 12%.
Least desirable
CC
$11,600
10,600
9,600
Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.)
$31,800
AA
years
BB
Indicating the most desirable project and the least desirable project using this method.
years
CC
years

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