The reason for a small firm to be rational to use the payback method rather than the NPV method. Introduction: Payback Period: It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it. Net Present Value (NPV): It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

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Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

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Answer 2

Question

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

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Answer 3

Question

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

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Answer 4

Question

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

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Answer 5

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

Answer 6

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

Answer 7

Chapter 11, Problem 7Q

Summary Introduction

To explain: The reason for a small firm to be rational to use the payback method rather than the NPV method.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Net Present Value (NPV):

It is a method under capital budgeting which includes the calculation of net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after considering the discounted rate.

Answer 8

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Answer 11

Ch. 11 - How are project classifications used in the...Ch. 11 - Prob. 2Q Ch. 11 - Why is the NFV of a relatively long-term project...Ch. 11 - Prob. 4Q Ch. 11 - If two mutually exclusive projects were being...Ch. 11 - Discuss the following statement: If a firm has...Ch. 11 - Prob. 7Q Ch. 11 - Project X is very risky and has an NPV of 3...Ch. 11 - Prob. 9Q Ch. 11 - A firm has a 100 million capital budget. It is...

Solution Summary: The author explains the reason for a small firm to use the payback method rather than the NPV method for capital budgeting decisions.

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