payback period for Project A and Project B

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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Question

X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are as follows:

 

Year Project A Project B
1 $ 23,000   $ 20,000  
2   10,000     9,000  
3   10,000     15,000  
 

 

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
 

a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)
  project A 0.87 years project B 1 year

 

b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
  

Appendix B
Appendix B Present value of $1, PVF
PV = FV
Percent
Period
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
1
0.990
0.980
0.971
0.962
0.952
0.943
0.935
0.926
0.917
0.909
0.901
0.893
0.980
0.961
0.943
0.925
0.907
0.890
0.873
0.857
0.842
0.826
0.812
0.797
3
0.971
0.942
0.915
0.889
0.864
0.840
0.816
0.794
0.772
0.751
0.731
0.712
4
0.961
0.924
0.888
0.855
0.823
0.792
0.763
0.735
0.708
0.683
0.659
0.636
0.951
0.906
0.863
0.822
0.784
0.747
0.713
0.681
0.650
0.621
0.593
0.567
6.
0.942
0.888
0.837
0.790
0.746
0.705
0.666
0.630
0.596
0.564
0.535
0.507
7.
0.933
0.871
0.813
0.760
0.711
0.665
0.623
0.583
0.547
0.513
0.482
0.452
8
0.923
0.853
0.789
0.731
0.677
0.627
0.582
0.540
0.502
0.467
0.434
0.404
0.914
0.837
0.766
0.703
0.645
0.592
0.544
0.500
0.460
0.424
0.391
0.361
10
0.905
0.820
0.744
0.676
0.614
0.558
0.508
0.463
0.422
0.386
0.352
0.322
11
0.896
0.804
0.722
0.650
0.585
0.527
0.475
0.429
0.388
0.350
0.317
0.287
12
0.887
0.788
0.701
0.625
0.557
0.497
0.444
0.397
0.356
0.319
0.286
0.257
13
0.879
0.773
0.681
0.601
0.530
0.469
0.415
0.368
0.326
0.290
0.258
0.229
14
0.870
0.758
0.661
0.577
0.505
0.442
0.388
0.340
0.299
0.263
0.232
0.205
15
0.861
0.743
0.642
0.555
0.481
0.417
0.362
0.315
0.275
0.239
0.209
0.183
16
0.853
0.728
0.623
0.534
0.458
0.394
0.339
0.292
0.252
0.218
0.188
0.163
17
0.844
0.714
0.605
0.513
0.436
0.371
0.317
0.270
0.231
0.198
0.170
0.146
18
0.836
0.700
0.587
0.494
0.416
0.350
0.296
0.250
0.212
0.180
0.153
0.130
19
0.828
0.686
0.570
0.475
0.396
0.331
0.277
0.232
0.194
0.164
0.138
0.116
20
0.820
0.673
0.554
0.456
0.377
0.312
0.258
0.215
0.178
0.149
0.124
0.104
25
0.780
0.610
0.478
0.375
0.295
0.233
0.184
0.146
0.116
0.092
0.074
0.059
30
0.742
0.552
0.412
0.308
0.231
0.174
0.131
0.099
0.075
0.057
0.044
0.033
40
0.672
0.453
0.307
0.208
0.142
0.097
0.067
0.046
0.032
0.022
0.015
0.011
50
0.608
0.372
0.228
0.141
0.087
0.054
0.034
0.021
0.013
0.009
0.005
0.003
Appendix B (concluded) Present value of $1
Percent
Period
13%
14%
15%
16%
17%
18%
19%
20%
25%
30%
35%
40%
50%
0.885
0.877
0.870
0.862
0.855
0.847
0.840
0.833
0.800
0.769
0.741
0.714
0.667
0.783
0.769
0.756
0.743
0.731
0.718
0.706
0.694
0.640
0.592
0.549
0.510
0.444
0.693
0.675
0.658
0.641
0.624
0.609
0.593
0.579
0.512
0.455
0.406
0.364
0.296
0.613
0.592
0.572
0.552
0.534
0.515
0.499
0.482
0.410
0.350
0.301
0.260
0.198
0.543
0.519
0.497
0.476
0.456
0.437
0.419
0.402
0.328
0.269
0.223
0.186
0.132
6.
0.480
0.456
0.432
0.410
0.390
0.370
0.352
0.335
0.262
0.207
0.165
0.133
0.088
0.425
0.400
0.376
0.354
0.333
0.314
0.296
0.279
0.210
0.159
0.122
0.095
0.059
0.376
0.351
0.327
0.305
0.285
0.266
0.249
0.233
0.168
0.123
0.091
0.068
0.039
0.333
0.308
0.284
0.263
0.243
0.225
0.209
0.194
0.134
0.094
0.067
0.048
0.026
10
0.295
0.270
0.247
0.227
0.208
0.191
0.176
0.162
0.107
0.073
0.050
0.035
0.017
11
0.261
0.237
0.215
0.195
0.178
0.162
0.148
0.135
0.086
0.056
0.037
0.025
0.012
12
0.231
0.208
0.187
0.168
0.152
0.137
0.124
0.112
0.069
0.043
0.027
0.018
0.008
13
0.204
0.182
0.163
0.145
0.130
0.116
0.104
0.093
0.055
0.033
0.020
0.013
0.005
14
0.181
0.160
0.141
0.125
0.111
0.099
0.088
0.078
0.044
0.025
0.015
0.009
0.003
15
0.160
0.140
0.123
0.108
0.095
0.084
0.074
0.065
0.035
0.020
0.011
0.006
0.002
16
0.141
0.123
0.107
0.093
0.081
0.071
0.062
0.054
0.028
0.015
0.008
0.005
0.002
17
0.125
0.108
0.093
0.080
0.069
0.060
0.052
0.045
0.023
0.012
0.006
0.003
0.001
18
0.111
0.095
0.081
0.069
0.059
0.051
0.044
0.038
0.018
0.009
0.005
0.002
0.001
19
0.098
0.083
0.070
0.060
0.051
0.043
0.037
0.031
0.014
0.007
0.003
0.002
20
0.087
0.073
0.061
0.051
0.043
0.037
0.031
0.026
0.012
0.005
0.002
0.001
25
0.047
0.038
0.030
0.024
0.020
0.016
0.013
0.010
0.004
0.001
0.001
30
0.026
0.020
0.015
0.012
0.009
0.007
0.005
0.004
0.001
40
0.008
0.005
0.004
0.003
0.002
0.001
0.001
0.001
50
0.002
0.001
0.001
0.001
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Transcribed Image Text:Appendix B Appendix B Present value of $1, PVF PV = FV Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 6. 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 7. 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 30 0.742 0.552 0.412 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.005 0.003 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.800 0.769 0.741 0.714 0.667 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.640 0.592 0.549 0.510 0.444 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.512 0.455 0.406 0.364 0.296 0.613 0.592 0.572 0.552 0.534 0.515 0.499 0.482 0.410 0.350 0.301 0.260 0.198 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.328 0.269 0.223 0.186 0.132 6. 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.210 0.159 0.122 0.095 0.059 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.168 0.123 0.091 0.068 0.039 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.134 0.094 0.067 0.048 0.026 10 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.107 0.073 0.050 0.035 0.017 11 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.086 0.056 0.037 0.025 0.012 12 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0.043 0.027 0.018 0.008 13 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.055 0.033 0.020 0.013 0.005 14 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.044 0.025 0.015 0.009 0.003 15 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.011 0.006 0.002 16 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.028 0.015 0.008 0.005 0.002 17 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.023 0.012 0.006 0.003 0.001 18 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.018 0.009 0.005 0.002 0.001 19 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.014 0.007 0.003 0.002 20 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.012 0.005 0.002 0.001 25 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.004 0.001 0.001 30 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.001 40 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 50 0.002 0.001 0.001 0.001 oo o o o o O o o
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