Cash payback method: Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business. In simple, the cash payback period is computed as follows: Cash payback period = Initial cost Annual net cash inflow To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

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Answer 1

Question

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

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Question

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

Expert Solution & Answer

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Answer 3

Question

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

Expert Solution & Answer

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Answer 4

Question

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

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Answer 5

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

Answer 6

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

Answer 7

Chapter 25, Problem 5DQ

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

In simple, the cash payback period is computed as follows:

Cash payback period =Initial costAnnual net cash inflow

To determine: The reason for which the cash pay back method understates the attractiveness of a project with a large residual value.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 25 - Prob. 1DQ Ch. 25 - Discuss the principal limitations of the cash...Ch. 25 - Prob. 3DQ Ch. 25 - Prob. 4DQ Ch. 25 - Prob. 5DQ Ch. 25 - Prob. 6DQ Ch. 25 - Prob. 7DQ Ch. 25 - Two projects have an identical net present value...Ch. 25 - Prob. 9DQ Ch. 25 - Prob. 10DQ

Solution Summary: The author explains that the cash payback method understates the attractiveness of a project because it doesn't consider cash flows occurring after the pay back period.

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