Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Year 1 Year 2 Year 3 Year 4 Cash Flow $275,000 $475,000 $450,000 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O $332,447 $369,385 O$443,262 $295,508 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. The discounted payback period is calculated using net income instead of cash flows. The discounted payback period does not take the project's entire life into account. The discounted payback period does not take the time value of money into account.
Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Year 1 Year 2 Year 3 Year 4 Cash Flow $275,000 $475,000 $450,000 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O $332,447 $369,385 O$443,262 $295,508 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. The discounted payback period is calculated using net income instead of cash flows. The discounted payback period does not take the project's entire life into account. The discounted payback period does not take the time value of money into account.
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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Transcribed Image Text:Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however,
she does know that the project's regular payback period is 2.5 years.
Year
Year 1
Year 2
Year 3
Year 4
Cash Flow
$275,000
$475,000
$450,000
$400,000
If the project's weighted average cost of capital (WACC) is 7%, what is its NPV?
$332,447
$369,385
O $443,262
O $295,508
Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply.
The discounted payback period is calculated using net income instead of cash flows.
The discounted payback period does not take the project's entire life into account.
The discounted payback period does not take the time value of money into account.
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