FCB Industries is evaluating two projects based on the discounted payback method. The company’s cost of capital is 12%. Project A is deemed to be of average risk, but Project B has a very high risk profile. The company has decided to adjust the discount rate by 2% for Project B. The investments and operating cash flows follow: Project A Project B Investment ($5,000) ($6,000) Cash flows 1 $2,500 $3,000 2 $2,000 $2,250 3 $1,500 $1,750 4 $1,000 $1,500 Calculate the discounted payback period for Project B Group of answer choices 3.51 years 3.30 years 3.10 years 3.48 years 3.69 years 2.43 years 3.15 years 3.81 years
FCB Industries is evaluating two projects based on the discounted payback method. The company’s cost of capital is 12%. Project A is deemed to be of average risk, but Project B has a very high risk profile. The company has decided to adjust the discount rate by 2% for Project B. The investments and operating cash flows follow: Project A Project B Investment ($5,000) ($6,000) Cash flows 1 $2,500 $3,000 2 $2,000 $2,250 3 $1,500 $1,750 4 $1,000 $1,500 Calculate the discounted payback period for Project B Group of answer choices 3.51 years 3.30 years 3.10 years 3.48 years 3.69 years 2.43 years 3.15 years 3.81 years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
56
FCB Industries is evaluating two projects based on the discounted payback method. The company’s cost of capital is 12%. Project A is deemed to be of average risk, but Project B has a very high risk profile. The company has decided to adjust the discount rate by 2% for Project B. The investments and operating
|
Project A |
Project B |
Investment |
($5,000) |
($6,000) |
Cash flows |
|
|
1 |
$2,500 |
$3,000 |
2 |
$2,000 |
$2,250 |
3 |
$1,500 |
$1,750 |
4 |
$1,000 |
$1,500 |
Calculate the discounted payback period for Project B
Group of answer choices
3.51 years
3.30 years
3.10 years
3.48 years
3.69 years
2.43 years
3.15 years
3.81 years
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!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education