Consider the following three projects. All three have an initial investment of $500,000.E (Click the icon to view the investments.)Requirements1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.2. Are there other factors that should be considered in addition to the payback period?Requirement 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.First, determine the payback period of each project. (Enter the payback period as a numeral )Payback period inProjectyearsProject Lyears6 Data TableProject MyearsProject NyearsNet Cash InflowsProject LProject MProject NYearAnnualAccumulatedAnnualAccumulatedAnnualAccumulatedYear 1 $ 100,000 $100,000 $50,000 $50.000 $ 250,000 $250,000Year 2100,000200,000100, 000150 000250,000500,000Year 3100,000300,000|350,000500,000Year 4100,000400,000450,000950,000Year 5100,000500,000550,0001,500,000Year 6100,000600,000Year 7100,000700,000Year 8100,000800,000

Payback Period is the period in which the amount of Initial Investment can be recovered. Project…

Requirements 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback. Are there other factors that should be considered in addition to the payback period? 2.

Requirements 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback. Are there other factors that should be considered in addition to the payback period? 2.

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: a) What is the NPV for Project A? b) What is the NPV for Project B? c) What is the IRR for Project…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: which of the following could potentially impact the NPV of a project?

A: Net present value (NPV) analysis is a capital budgeting analysis that helps in evaluating the…

Q: What would you recommend if the benefit / cost ratio is >1: Select one: a. Benefit/cost ratio…

A: In very long term projects of government and social nature Benefits/cost ratio is considered.

Q: Which is the most efficient analysis method used to determine the project acceptability on an…

A: Present worth is a financial identicalness approach in which incomes of a venture are estimated at…

Q: According to the Productivity Index, which project should be chosen? Explain why people use the…

A: Net present value is the amount which is computed by subtracting the present value of cash outflow…

Q: Based on the calculated payback period, NPV, and IRR for each project: If these projects are…

A: 1) If projects are independent, then all projects are recommended for investing only if a) Net…

Q: A cost-benefit analysis, or CBA, is an evaluation o

A: A cost-benefit analysis (CBA) involves assessing the costs associated with implementing the program…

Q: Discuss which tools you would use to decide whether a project is worthy of financing? Also,…

A: net present value is the tool used to decide that a project is worthy of financing net present value…

Q: Management would consider a project when IRR is greater than the RRR

A: IRR - Internal rate of return is used to analyze how much an investment or a project will be…

Q: How can we aggregate the risk over the project life in terms of net present value?

A: It is an incorporation of the risk level of the project over the life of the in terms of NPV by way…

Q: the project The ____ the coefficient of variation, the attractiveness. a) lower; lower b) higher;…

A: The term risk refers to the deviation from the expected returns. The deviation could either be…

Q: Explain Project Feasibility and Profitability?

A: It is a study containing an itemized portrayal of the project, trailed by a lot of various…

Q: A project’s IRR is the discount rate that causes the PV of the inflows to equal the project’s cost.…

A: The given statement is true.

Q: ou assign the highest anticipated sales and price and the lowest anticipated costs to a project, you…

A: In doing analysis of projects there is uncertainty regarding sales and cost so due to this different…

Q: When evaluating projects by the present worth method, how do you know which one(s) to select if the…

Q: How can the working-capital requirements significantly reduce a project's profitability or rate of…

A: More risky investments would bring about more returns. In this manner, an organization with high…

Q: 3. How do we compare costs and benefits to evaluate the optimality of public projects?

A: The optimality of public projects refers to the idea that a project is considered optimal if the…

Q: Question 5: Find the net present value, interpret whether the NPV suggests you should accept or…

A: A. Net Present Value (NPV):Net present value = total present value - initial valueNet present value…

Q: 11. Explain what a sunk cost is, what an opportunity cost is, and how each cost should be handled…

A: A sunk cost is the cost that is already incurred and is not recoverable. This type of cost is not…

Q: Can we select projects according to their corresponding payback period?

A: Capital Budgeting is a process which helps the firm to determine the expected cash flows of a…

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

100%

Consider the following three projects. All three have an initial investment of $500,000.
E (Click the icon to view the investments.)
Requirements
1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.
2. Are there other factors that should be considered in addition to the payback period?
Requirement 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.
First, determine the payback period of each project. (Enter the payback period as a numeral )
Payback period in
Project
years
Project L
years
6 Data Table
Project M
years
Project N
years
Net Cash Inflows
Project L
Project M
Project N
Year
Annual
Accumulated
Annual
Accumulated
Annual
Accumulated
Year 1 $ 100,000 $
100,000 $
50,000 $
50.000 $ 250,000 $
250,000
Year 2
100,000
200,000
100, 000
150 000
250,000
500,000
Year 3
100,000
300,000|
350,000
500,000
Year 4
100,000
400,000
450,000
950,000
Year 5
100,000
500,000
550,000
1,500,000
Year 6
100,000
600,000
Year 7
100,000
700,000
Year 8
100,000
800,000

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 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

Projects with _____are preferred. O a. Lower payback period. O b. Normal payback period. O c. Higher payback period. O d. Any payback period.
Payback is best used to evaluate which types of project
Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $23,100. Each project will last for 3 years and produce the following net annual cash flows. Year 1 (a) 2 3 AA AA BB CC 9,450 Total $29,400 $31,500 BB $7,350 $10,500 $13,650 12,600 (b) 10,500 10,500 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. CC Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) Which is the most desirable project? 12,600 Which is the least desirable project? 11,550 $37,800 years years The most desirable project based on payback period is years The least desirable project based on payback period is Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or…
Please explain the answer thoroughly and support it with an example. True or False: In preference decisions, the profitability index and internal rate of return methods will rank projects in the same order of preference.
1. State the criterion for accepting or rejecting independent projects under each of the following methods. - Profitability index - Discounted payback period - Accounting rate of return - Net present value - Payback period - Internal rate of return
In calculating the Net Present Value, the project would be acceptable if the outcome was: Group of answer choices Positive Positive or Zero Zero Negative
When choosing between two projects of different scales, which of the following methodologies is best employed? a. Probability index to rank projects b. Equivalent annuities method c. Replacement chain method d. IRR method
What is the process of economically evaluating a project's desirability?
Illustrate Investment Decision for a Nonsimple Project?
The average accounting rate of return (AAR): Select one: A. is the best method of financially analysing mutually exclusive projects. B. is similar to the return on assets ratio. C. measures net income as a percentage of the sales generated by a project. D. considers the time value of money. E. is the primary methodology used in analyzing independent projects.
Why is it important to make the distinction between company required rate of return (WACC) and project required rate of return when evaluating projects?
How do we calculate the PWfor the projects?