Payback Period: Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows: P a y b a c k P e r i o d = I n i t i a l I n v e s t m e n t A n n u a l C a s h inf l o w NPV: Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows: N P V = P r e s e n t v a l u e o f c a s h i n f l o w s – P r e s e n t v a l u e o f c a s h o u t f l o w s Requirement-1: To Calculate: Payback period for the project

Question

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Answer 1

Question

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

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Answer 2

Question

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

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Answer 3

Question

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

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Answer 4

Question

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

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Answer 5

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

Answer 6

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

Answer 7

Chapter 26, Problem 6BPSB

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-1:

To Calculate:

Payback period for the project

Answer 8

Expert Solution

Answer to Problem 6BPSB

Payback period for the project is 1.9 years

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Payback period for the project is calculated as follows;

	Cash Flows	Accumulated Cash Flows
Period 1	$ 450,000	$ 450,000
Period 2	$ 400,000	$ 850,000
Period 3	$ 350,000	$1,200,000
Period 4	$ 300,000	$1,500,000

Payback Period = 1 Year + (800000-450000)/400000 =	1.9 Years

Answer 13

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

Answer 14

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-2:

To Calculate:

Breakeven time for the investment

Answer 15

Expert Solution

Answer to Problem 6BPSB

Breakeven time for the investment is 2.2 Years

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Breakeven time for the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV	Accumulated PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095.00	$ 409,095.00
Period 2	$ 400,000	0.8264	$ 330,560.00	$ 739,655.00
Period 3	$ 350,000	0.7513	$ 262,955.00	$ 1,002,610.00
Period 4	$ 300,000	0.6830	$ 204,900.00	$ 1,207,510.00

Breakeven Time = 2 Years +(800000-739655)/262955 =	2.2 Years

Answer 20

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

Answer 21

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-3:

To Calculate:

The Net Present Value of the investment

Answer 22

Expert Solution

Answer to Problem 6BPSB

The Net Present Value of the investment is $407,510

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

Answer 27

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

Answer 28

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-4:

If the management should invest in the project

Answer 29

Expert Solution

Answer to Problem 6BPSB

Yes, the management should invest in the project.

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

The Net Present Value of the investment is calculated as follows:

	Cash Flows	PV of $1 (10%)	PV
	A	B	*C=AB**
Period 1	$ 450,000	0.9091	$ 409,095
Period 2	$ 400,000	0.8264	$ 330,560
Period 3	$ 350,000	0.7513	$ 262,955
Period 4	$ 300,000	0.6830	$ 204,900
Total Present value	$1,207,510
Less: Initial investment	$(800,000)
Net Present value	$ 407,510

The Net Present Value of the investment is $407,510; hence the management should invest in the project.

Answer 34

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.

Answer 35

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. The formula to calculate the Payback period is as follows:

Payback Period= Initial InvestmentAnnual Cash inflow

NPV:

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

Requirement-5:

If the reason of differences in answers as compared with the previous situation

Answer 36

Expert Solution

Answer to Problem 6BPSB

The reason of differences in answers as compared with the previous situation is the cash flow pattern.

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

The reason of differences in answers as compared with the previous situation is the cash flow pattern. In the previous case, the higher cash flows are occurring in later years but in this situation the cash flows are higher in initial years of the project.