Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 12.2WUE
You wish to evaluate a project requiring an initial investment of $59,500 and having a useful life of 7 years. What minimum amount of annual
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You wish to evaluate a project requiring a $60,100 initial investment and having a useful life of seven years. What minimum annual cash inflow do you need if the cost of capital is 8.2%? If the
project earns $12,900 per year, what is its IRR? Is the project acceptable?
The minimum annual cash inflow necessary is $
(Round to the nearest cent.)
You are evaluating a project that will cost $502,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.7% and your
company's preferred payback period is three years or less.
a. What is the payback period of this project?
b. Should you take the project if you want to increase the value of the company?
a. What is the payback period of this project?
The payback period is
years. (Round to two decimal places.)
b. Should you take the project if you want to increase the value of the company? (Select from the drop-down menus.)
If you want to increase the value of the company you
take the project since the NPV is
will not
will
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?
Chapter 12 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 12.1 - Are most mutually exclusive capital budgeting...Ch. 12.2 - Prob. 12.2RQCh. 12.2 - Describe how each of the following behavioral...Ch. 12.3 - Briefly explain how the following items affect the...Ch. 12.4 - Describe the basic procedures involved in using...Ch. 12.4 - Explain why a firm whose stock is actively traded...Ch. 12.4 - Prob. 12.8RQCh. 12.5 - Explain why a mere comparison of the NPVs of...Ch. 12.5 - What are real options? What are some major types...Ch. 12.5 - What is the difference between the strategic NPV...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?arrow_forwardRedbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?arrow_forwardYou are evaluating a project that will cost $508,000, but is expected to produce cash flows of $126,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.3% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.)arrow_forward
- You are considering a project with an initial cash outlay of $80,000 and expected free cash flows of $20,000 at the end of each year for 6 years. The required rate of return for this project is 10 percent. A; What is the project’s payback period? B; What is the project’s NPV ? C; What is the project’s PI ? D; What is the project’s IRR ?arrow_forwardYou are evaluating a project that will cost $474,000, but is expected to produce cash flows of $130,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.5% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company?arrow_forwardExplain all point of question with proper explanation.arrow_forward
- You are evaluating a project that will cost $543,000, but is expected to produce cash flows of $127,000 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? b. Should you take the project if you want to increase the value of the company?arrow_forwardYou are considering a project with an initial cash outlay of $100,000 and expected free cash flows of $25,000 at the end of each year for 6 years. The required rate of return for this project is 10 percent. What is the project’s payback period? What is the project’s NPV ? What is the project’s PI ? What is the project’s IRR ?arrow_forwardYou have an investment opportunity that requires an initial investment of $5,500 today and will pay $11,500 in one year. What is the IRR of this opportunity?arrow_forward
- You have an investment opportunity that requires an initial investment of $5,000 today and will pay $6,000 in one year. What is the IRR of this opportunity?arrow_forwardA project is expected to generate the following cash flows: $1 million in one year, $3.7 million in two years, $4 million in three years and $4,3 million in four years. The cash flow is then expected to remain constant (54 3 million per year) in perpetuity. How much are you willing to invest in the project today if you want the project to have an internal Rate of Return (IRR) of 15% ?arrow_forward(Paybackperiod, NPV, PI, and IRR calculations) You are considering a project with an initial cash outlay of $80,000 and expected free cash flows of $26,000 at the end of each year for 6 years. The required rate of return for this project is 7 percent. a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License