The conventional payback period ignores the time value of money, and this concerns Cute Camel's CFO. He has now asked you to compute Sigma's discounted payback period, assuming the company has a 9% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Cash flow Discounted cash flow Cumulative discounted cash flow Discounted payback period: O The regular payback period Year 0 -$5,000,000 S $ The discounted payback perind years S Year 1 $2,000,000 S Year 2 $4,250,000 Which version of a project's payback period should the CFO use when evaluating Project Sigma, given its theoretical superiority? Year 3 $1,750,000
The conventional payback period ignores the time value of money, and this concerns Cute Camel's CFO. He has now asked you to compute Sigma's discounted payback period, assuming the company has a 9% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Cash flow Discounted cash flow Cumulative discounted cash flow Discounted payback period: O The regular payback period Year 0 -$5,000,000 S $ The discounted payback perind years S Year 1 $2,000,000 S Year 2 $4,250,000 Which version of a project's payback period should the CFO use when evaluating Project Sigma, given its theoretical superiority? Year 3 $1,750,000
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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