Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 1PS
Payback*
- a. What is the payback period on each of the following projects?
- b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?
- c. If you use a cutoff period of three years, which projects would you accept?
- d. If the
opportunity cost of capital is 10%, which projects have positive NPVs? - e. “If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” True or false?
- f. If the firm uses the discounted-payback rule, will it accept any negative-
NPV projects? Will it turn down any positive-NPV projects?
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Students have asked these similar questions
a. They payback period of project A is ___ years (round to two decimal places)
The payback period of project B is ____ years. (round to two decimal places)
According to the payback method, which project should the firm choose?
b. The NPV of project A is $___
The NPV of project B is $___
c. The IRR of project A is ___
The IRR of project B is ___
d. Make a reccomendation
Please answer the following questions in detail, provide examples whenever applicable, provide in-text citations.
(TABLE IMAGE ATTACHED)
What is the payback period on each of the above projects?
Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?
If you use a cutoff period of three years, which projects would you accept?
If the opportunity cost of capital is 10%, which projects have positive NPVs?
If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” True or false?
If the firm uses the discounted-payback rule, will it accept any negative-NPV projects? Will it turn down any positive NPV projects?
（i.）If the projects are mutually exclusive and the required rate of return is 7%, which of the projects is chosen by NPV?a. Project Omicronb. Project Upsilonc. Project Omegad. Project Upsilon and Project Omegae. None of the above
(ii.)If you use a cut-off period of two years, which of the projects would you accept using the payback period method?a. Project Omicronb. Project Upsilonc. Project Omegad. Project Upsilon and Project Omegae. None of the above
Chapter 5 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 5 - (IRR) Check the IRRs for project F in Section 5-3.Ch. 5 - (IRR) What is the IRR of a project with the...Ch. 5 - (XIRR) What is the IRR of a project with the...Ch. 5 - Payback a. What is the payback period on each of...Ch. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 3PSCh. 5 - IRR rule You have the chance to participate in a...Ch. 5 - IRR rule Consider a project with the following...Ch. 5 - IRR rule Consider projects Alpha and Beta: The...Ch. 5 - Capital rationing Suppose you have the following...
Ch. 5 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 9PSCh. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 5 - IRR rule Consider the following two mutually...Ch. 5 - IRR rule Mr. Cyrus Clops, the president of Giant...Ch. 5 - Prob. 13PSCh. 5 - Profitability index Look again at projects D and E...Ch. 5 - Prob. 15PSCh. 5 - Prob. 16PS
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