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

See similar textbooks

Related questions

Q: Explain the concept of dollar cost averaging and its effect on potential returns provided there's a…

A: Investment is basically done by the investors with a hope of appreciation in their principal…

Q: I have a question about calculating spot rates. In the task we're given five spot rates: r1 =…

A: Interest Rate for loan at given point or current time is called spot rate whereas Rate for future…

Q: Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2) that…

A: Capital budgeting is a strategic financial planning process used by companies to evaluate and select…

Q: Information on four investment proposals is given below: A Investment required Net present value. $…

A: Profitability index = Present value of cash inflows / Initial investmentHigher the profitability…

Q: The Payback period as per calculation is 6 Years . Pre determined payback period is 5.5 Years…

A: Solution: Computed payback period = 6 years Required payback period = 5.5 years

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to yield…

A: The average rate of return is an approach of comparison the profit of various selections over the…

Q: QUESTION 4 REQUIRED Use the information provided below to calculate the following: 4.1 Payback…

A: Capital budgeting techniques refers to the techniques that can be used by an investor to evaluate…

Q: (a) For each of the projects in the table below identify the simple investments and the non-simple…

A: Internal Rate of Return: When evaluating the attractiveness of a given investment opportunity, the…

Q: Average rate of return The following data are accumulated by Patterson Inc. in evaluating two…

A: AVERAGE RATE OF RETURN The average rate of return refers to the average amount of profit that is…

Q: Alternatives A, B associated with a project have data as in the following figure, MARR=12% /year,…

A: Here, To Find: Alternative to select =?

Q: Given the following attributes of an investment project with a five-year life: investment outlay,…

A: a) Net present value: Net present value is the variation among current value of cash inflows and…

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

Q: Check whether the project is accepted or rejected and recommend the best project, MARR=6% and n=8…

A: The payback period is the time duration in which the company can recover its initial cost. The ROI…

Q: 1. An ICT project has the following characteristics: annual costs are committed at the beginning of…

A: Investment appraisal is a branch of financial management dealing with evaluation of potential…

Q: Cardinal Company is considering a five-year project that would require a $2,765,000 investment in…

A: Solution: Payback period = Initial investment / Annual cash inflows Simple rate of return = Net…

Q: Plot a sensitivity graph for annual worth versus initial cost, annual revenue, and salvage value for…

A: Sensitivity analysis is performed to assess the impact of change in any variable, on the overall…

Q: Determine the payback period for a proposed investment as follows: End of Year 1 2 3 5 Cash Flow,…

A: In this question the cash flows should be in thousands. Initial…

Q: 3.4 Benefit Cost Ratio of Project B (answer expressed to three decimal places). 3.5 Internal Rate of…

A: Internal Rate of Return (IRR) is that discounting rate at which Net Present Value of the project is…

Q: Question Content Area Assume in analyzing alternative proposals that Proposal F has a useful life…

A: The objective of the question is to identify a method that can be used to make the net present…

Q: 5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.2…

A: When a company has to select one alternative out of two or more alternative then company compare its…

Q: Calculate the Payback Period of Project A (expressed in years, months and days) Calculate the…

A: Accounting rate of return (ARR) and benefit to cost ratio are calculated as shown below.

Q: Accounting Rate of Return on average investment of Project A (expressed to two decimal places

A: The Accounting rate of return is calculated by dividing average annual profits by average investment…

Q: Profitability Index A project has an initial cost of $40,000, expected net cash inflows of $14,000…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: Net present value Using a cost of capital of 15%, calculate the net present value for the project…

A: Net present value is one of the technique used for capital budgeting projects. Undet this, net…

Q: INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance…

A: Payback Period is that period under which we will received the money which was invested by the…

Q: QUESTION #1. Answer must be in DECIMAL FORM How many YEARS is the PAYBACK PERIOD of PROJECT 1?…

A: In capital budgeting payback period is the time taken to recover the amount put in as the initial…

Q: The following mutually exclusive investment alternatives have been presented to you. The life of all…

A: The best alternatives refer to the lowest cost of alternative projects and these alternatives…

Q: Question 3: Assume that we wish to determine the expected value and standard deviation of returns of…

A: Computation:

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: REQUIRED Use the information provided below to calculate the following: 3.1 Payback Period of…

A: Pay back Period = Initial Cost / Annual Cashflow Accounting Rate of Return = Average Net Income /…

Q: Based on the parameters calculated, should this project goes ahead? Give your reasons for your…

A: Based on the economic parameters provided, it seems that the solar panel project is not very…

Q: 9% b. 20% c. 26% d. 22

A: IRR is a rate at which present value of cash inflows is equal to present value of cashoutflows.

Q: analysis, determine which one of the three mutually exclusive alternativ should be selected. Each…

A: Given First cost , Uniform annual benefit and Salvage value of device A,B & C.

Q: A decision-maker can select one of these alternatives or decide to select none of them. Make a…

A: To select the desired cash flow process, apply the present worth method to the given alternatives.

Q: Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two…

A: Average rate of return:-It is the average annual return (profit) from an investment. The ARR is…

Q: ssuming a six-year time horizon, what is the internal rate of return of the remodeling project?…

A: Internal rate of return is the break even rate at which present value of cash flow is equal initial…

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to yield…

A: Average annual income = $665,820/6 Average annual income = $110,970 Average investment = ($731,600…

Q: Find the IRR for an investment that has an initial outlay of 25,000 and is expected to achieve…

A: Information Provided: Cash outflow = (25,000) Cash Inflow (for 7 years) = 30,000

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: Determine the average rate of return for a project that is estimated to yield total income of…

A: Solution .. Average investment = (Cost + residual value ) / 2 = ($511,000 + $51,000) / 2 =…

Q: Average Rate of Return Determine the average rate of return for a project that is estimated to yield…

A: It is also known by the name of the accounting rate of return. We can evaluate by dividing average…

Q: A project has estimated annual net cash flows of $30,500. It is estimated to cost $115,900.…

A: Payback period is the period required to recover initial investment of the project that is being…

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

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1: Defination of Payback Period:

VIEW

Step 2: Calculation of Payback Period of all projects:

VIEW

Step 3: Most desirable and least desirable:

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

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, accounting and related others by exploring similar questions and additional content below.

Similar questions

Question 5 Use the information provided to answer the questions. 5.1 Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.1 5.1.2 5.1.3 5.1.4 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice.
need answer for this pls help asap
Please do not give solution in image format thanku
Profitability Index A project has an initial cost of $50,000, expected net cash inflows of $15,000 per year for 7 years, and a cost of capital of 10%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.
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…
Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $467,480 over four years, has a cost of $725,400, and has a $80,600 residual value. Round to the nearest whole number.
Based on estimates the data for 2 types of bridges with different lives are as follows. If the minimum attractive rate of return is 9%, determine which project is more desirable using Annual Cost Method & Rate of Return Method. Timber Bridge Steel Bridge First Cost Salvage Value Life in yrs Annual maintenance 500k 20k 12 60k 1.4M 100k 36 25k
Please answer ASAP if you can please. Thank you! Please Please write expression or formula used Set up expression initially with functional notation (e.g.,(P/F,I,n))
Cash Payback Period A project has estimated annual net cash flows of $37,500. It is estimated to cost $127,500. Determine the cash payback period. Round your answer to one decimal place. years
Data for 2 alternatives are given below. If i = 10%, determine the cost of alternative A so that the 2 alternatives will be equally desirable using BC ratio.
You Answered Some particulars for a project are as follows. Initial Capital Cost in year 0 ($Mn) Follow-up 'one-off' cost in year 1 ($Mn) Annual Operating Cost ($Mn/yr) Annual Benefits ($Mn/yr) Correct Answers Project Closure Cost, at end of project life ($Mn) Useful Life (years) Interest/Discount rate (percent) 1000 300 10% of capital cost 400 2,391 (with margin: 5) 200 20 7 What is the Life Cycle Cost of the project - expressed in present value term? (your answer must be rounded off to the nearest million dollars, i.e., no decimal places)
D-78 Which of the following equations can be used to find the internal rate of return (i) for a project that hun initial investment of P, net annual cash flows of A, and salvage value of S after n years? (a) 0 = -P + AP/A, i%,n) + SP/A, i%, n) | (b) (Р — А)P/А, 1%, п) — SPIF, 1%, n) (с) — А %3D — РАР, %, п) — S(AF, i1%, п — 1) (d) 0 = -PF/P, i%,n) + A(F/A, i%, n) + S