You are evaluating a project that will cost $544,000, but is expected to produce cash flows of $123,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.9 % and your company's preferred payback period is three years or less. a. What is the payback period of this project? payback period is ___years b. Should you take the project if you want to increase the value of the company?
You are evaluating a project that will cost $544,000, but is expected to produce cash flows of $123,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.9 % and your company's preferred payback period is three years or less. a. What is the payback period of this project? payback period is ___years b. Should you take the project if you want to increase the value of the company?
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
Related questions
Question
You are evaluating a project that will cost
$544,000, but is expected to produce cash flows of $123,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.9 % and your company's preferred payback period is three years or less.
a. What is the payback period of this project?
payback period is ___years
b. Should you take the project if you want to increase the value of the company?
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images

Recommended textbooks for you

Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,

Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education