Crane Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for their production systems. Year 0 1 2 3 System 1 -$14,800 14,800 14,800 14,800 System 2 -$43,600 33,000 33,000 The firm should invest in 33,000 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) Payback period of System 1 is years and Payback period of System 2 is years If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest?

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
icon
Related questions
Question

Vinubhai

Don't upload image please 

Current Attempt in Progress
Crane Incorporated management is considering investing in two alternative production systems. The systems are mutually
exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8
percent discount rate for their production systems.
Year
0
2
3
System 1
-$14,800
14,800
14,800
14,800
System 2
-$43,600
33,000
33,000
33,000
What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.)
The firm should invest in
Payback period of System 1 is
years and Payback period of System 2 is
years.
If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should
the firm invest?
Transcribed Image Text:Current Attempt in Progress Crane Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for their production systems. Year 0 2 3 System 1 -$14,800 14,800 14,800 14,800 System 2 -$43,600 33,000 33,000 33,000 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) The firm should invest in Payback period of System 1 is years and Payback period of System 2 is years. If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 3 images

Blurred answer
Knowledge Booster
Present Value
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
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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