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 ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment. The formula to calculate ARR is as follows: A R R = A v e r a g e A c c o u n t i n g p r o f i t s A v e r a g e I n v e s t m e n t 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 IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method. Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow . A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows: P r o f i t a b i l i t y i n d e x = P r e s e n t v a l u e c a s h i n f l o w 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 1. Calculation of Payback, ARR, NPV, IRR and the profitability index To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

Question

Want to see the full answer?

Answer 1

Question

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

test test 123

Need assi

Consolidation after Several Years On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2022. Enter numerical answers using all zeros (do not abbreviate in thousands or in…

Answer 2

Question

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Answer 6

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

Answer 7

Chapter 26, Problem P26.35BPGB

To determine

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:

$P a y b a c k P e r i o d = \frac{I n i t i a l I n v e s t m e n t}{A n n u a l C a s h \inf l o w}$

ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

$A R R = \frac{A v e r a g e A c c o u n t i n g p r o f i t s}{A v e r a g e I n v e s t m e n t}$

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:

$N P V = P r e s e n t v a l u e o f c a s h i n f l o w s - P r e s e n t v a l u e o f c a s h o u t f l o w s$

IRR: Internal Rate of Return (IRR) is the rate at which the NPV of the project is 0 or we can say that IRR is the rate of return at which the project is at breakeven. IRR is calculated using excel or approximation method.

Profitability Index: Profitability Index is similar to the NPV method to evaluate a project. It calculates the ratio between the present value cash inflow and present value of cash outflow. A project should be accepted it has a profitability index greater than or equal to 1. The formula to calculate the Profitability Index is a follows:

$P r o f i t a b i l i t y i n d e x = \frac{P r e s e n t v a l u e c a s h i n f l o w}{P r e s e n t v a l u e o f c a s h o u t f l o w}$

1. Calculation of Payback, ARR, NPV, IRR and the profitability index

To determine: The Payback, ARR, NPV, IRR and the profitability index for the given project

Answer 8

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Answer 9

To determine

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 26 - Prob. 1QC Ch. 26 - Prob. 2QC Ch. 26 - Prob. 3QC Ch. 26 - Prob. 4QC Ch. 26 - Prob. 5QC Ch. 26 - Prob. 6QC Ch. 26 - Prob. 7QC Ch. 26 - The IRR is Learning Objective 4 the interest rate...Ch. 26 - Prob. 9QC Ch. 26 - Ian Corp, is considering two expansion projects....

Concept explainers

Videos

2. Decision for investment in the project:

To decide: Whether to invest in the given project

Want to see the full answer?

Chapter 26 Solutions

Concept explainers

Videos

2. Decision for investment in the project: To decide: Whether to invest in the given project

Want to see the full answer?

Chapter 26 Solutions

2. Decision for investment in the project:

To decide: Whether to invest in the given project