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capital expenditure budgets concepts. One of the methods used is the payback period method.
what it means to have a project with a 3.5 years as payback period? Explain. If nvesting in this project, would you prefer a lower payback period (let's say 2.5 years for example) or a higher payback period (let's say 4.5 years for example)? and why?
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- ces Year 0 1 Cash Flow (A) -$430,000 41,500 2 64,500 3 81,500 4 545,000 Cash Flow (B). -$ 42,500 20,900 12,800 21,100 17,900 The required return on these investments is 10 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B years years Q Search < Prev 5 of 5 Next LAssume a $290,000 investment and the following cash flows for two products: Year Product X 1 A234 4 $ 100,000 100,000 75,000 40,000 Product Y $ 90,000 100,000 Product X Product Y 80,000 40,000 a. Calculate the payback for products X and Y. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. years years b. Which alternative would you select under the payback method? Product X is selected O Product Y is selectedWhat is Project A's Modified Internal Rate of Return with a WACC of 7.75%? YEAR 0 1 2 3 4 CASH FLOWS Project A -$1050 675 650 Project B -$1050 360 360 360 360
- LG 6 P5-60 Number of years to provide a given return In each of the following cases, determine the number of years that the given annual end-of-year cash flow must continue to provide the given rate of return on the given initial amount. TTT Case Initial amount Annual cash flow Rate of return A $1,000 $ 250 11% 150,000 30,000 15 80,000 10,000 10 600 275 E 17,000 3,500Spreadsheet Link What is the IRR of the following project? Cash Flow Year 0 32.000 9,000 1. 2 10,000 15,200 7,800 4. 1) 10.8% 2) 11.2% • 3) 11.7% 4) 12.0% 5) 12.3% 234Year Cash Flow (A) Cash Flow (D) $- -$ 0 348,000 51,000 1234 47,000 24,200 2 67,000 22,200 67,000 19,700 14,800 442,000 Whichever project you choose, if any, you require a return of 14 percent on your investment. a-1.What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B Payback period years years a- 2. If you apply the payback criterion, which investment will you choose? O Project A O Project B b- What is the discounted payback period for each project? (Do not round intermediate 1. calculations and round your answers to 2 decimal places, e.g., 32.16.)
- 11:52 Investment Appraisal (Year 2 Column 2... 35% 4. An investment has the following cash flows. What is the ARR? Year 0 -90,000 Year 1 45,000 10,000 Year 2 Year 3 30,000 30,000 Year 4 6% 7% 9% 5. Which of the following investments would you choose based on payback? Project 3 years 6 months 5 years 10 months A В ... Activity Chat Teams Assignments MoreFind the value of P for which the inflows will equal the outflows. Find the effective rate first. Rate Year Outflows 0 1 2 3 4 5 678 9 10 -P -2P -4P -8P -16P $1,530 $2,545 $3,269 $3,490 18% pycd Inflows $24,000 $30,000 $36,000 $42,000 $48,000 $54,000Problem 6. Justine Global Info Tech records the following cash flows at the end of each year for a project. If the firm's discount rate is 11%, what is the PRESENT VALUE of the project? Year Cash Flow 1 P794,633.00 P542,149.00 P836,200.00 P716,080.00 P520,354.00 2 3 4 5
- What is the project's MIRR? r = 10.00% 0 Year Cash flows O a. 22.51% O b. 11.75% O c. 17.21% O d. 14.81% O e. 15.65% -$875 1 $300 2 $320 3 $340 $360Consider the two projects in the following table: Year 0123 14.65% O 13,70 % What is the crossover point for the two projects? 14.95% Expected Net Cash Flow 13.25% Project A -$22,000 $15,000 $15,000 $15,000 Project B -$20,800 $14,100 $14,100 $14,100Problem 8-8 Payback (LO4) The following are the cash flows of two projects: Year Project A $ (380) Project B $ (380) 0 210 280 210 280 210 280 210 1234 4 What is the payback period of each project? Note: Round your answers to 1 decimal place. Project A B Payback Period years years