(a) Introduction: Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment. To explain: If the Payback period is enough for the company to decide to accept a project or not.

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Answer 1

Question

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

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Answer 2

Question

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Expert Solution & Answer

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Answer 3

Question

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Answer 6

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

Answer 7

Chapter 11, Problem 13E

To determine

(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

Answer 8

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

Answer 9

To determine

(b)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The company will accept or reject the project, using NPV method.

Answer 10

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

Answer 11

To determine

(c)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The reason for a difference of statements in part 1 and part 2 and the advice that will help the management to take a better decision.

Answer 12

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Answer 13

To determine

(d)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To state:

The impact it will have on NPV, if company’s cost of capital was 10%.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Which capital budgeting methods incorporate the...Ch. 11 - What is a company’s hurdle rate? How is it...Ch. 11 - How do cash flow and net income differ? Explain...Ch. 11 - In everyday terms, explain what information the...Ch. 11 - What do a positive NPV and a negative NPV indicate...Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

(a) Introduction: Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment. To explain: If the Payback period is enough for the company to decide to accept a project or not.

Solution Summary: The author explains the payback period as the time period required to cover the cost of an investment or the duration of time needed to recover the initial cost.

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(a)

Introduction:

Payback period is the time period required to cover the cost of an investment or it is the duration of time needed to recover the initial cost of an investment.

To explain:

If the Payback period is enough for the company to decide to accept a project or not.

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Chapter 11 Solutions