Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 3QP
Calculating Payback [LO2] Siva, Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?
| Year | Cash Row (A) | Cash Flow (B) |
| 0 | −$45,000 | −$ 55,000 |
| 1 | 16,000 | 13,000 |
| 2 | 21,000 | 15,000 |
| 3 | 15,000 | 24,000 |
| 4 | 9,000 | 255,000 |
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
pr.0
10.5 Net present value: Blanda Incorporated management is considering investing in two
alternative production systems. The systems are mutually exclusive, and the cost of the new
equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9
percent discount rate for production system projects, in which system should the firm invest?
Year
System 1
System 2
-$15,000
-$45,000
1
15,000
32,000
2
15,000
32,000
15,000
32,000
10.6 Payback: Refer to Problem 10.5. What are the payback periods for production systems 1 and
2? If the systems are mutually exclusive and the firm always chooses projects with the lowest
payback period, in which system should the firm invest?
10.7 Payback: Quebec, Inc., is purchasing machinery at a cost of $3,768,966. The company's
management expects the machinery to produce cash flows of $979,225, $1,158,886, and
$1,881,497 over the next three years, respectively. What is the payback period?
10.8 Payback: Northern Specialties just…
1. Kara, Incorporated, imposes a payback cutoff of three
international investment projects.
Year Cash Flow (A)Cash Flow (B)
-$ 73,000
0
1
2
3
4
$63,000
24,500
31,000
22,500
9,500
16,500
19,500
29,000
233,000
What is the payback period for both projects? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
What is the payback period for both projects? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Chapter 9 Solutions
Fundamentals of Corporate Finance
Ch. 9.1 - Prob. 9.1ACQCh. 9.1 - Prob. 9.1BCQCh. 9.2 - Prob. 9.2ACQCh. 9.2 - Why do we say that the payback period is, in a...Ch. 9.3 - Prob. 9.3ACQCh. 9.3 - What advantage(s) does the discounted payback have...Ch. 9.4 - What is an average accounting rate of return...Ch. 9.4 - What are the weaknesses of the AAR rule?Ch. 9.5 - Prob. 9.5ACQCh. 9.5 - Is it generally true that an advantage of the IRR...
Ch. 9.6 - What does the profitability index measure?Ch. 9.6 - How would you state the profitability index rule?Ch. 9.7 - Prob. 9.7ACQCh. 9.7 - If NPV is conceptually the best procedure for...Ch. 9 - Prob. 9.1CTFCh. 9 - Prob. 9.2CTFCh. 9 - Prob. 9.3CTFCh. 9 - Prob. 9.4CTFCh. 9 - What is a benefitcost ratio?Ch. 9 - Prob. 9.7CTFCh. 9 - Prob. 1CRCTCh. 9 - Net Present Value [LO1] Suppose a project has...Ch. 9 - Prob. 3CRCTCh. 9 - Prob. 4CRCTCh. 9 - Prob. 5CRCTCh. 9 - Net Present Value [LO1] Concerning NPV: a....Ch. 9 - Prob. 7CRCTCh. 9 - Profitability Index [LO7] Concerning the...Ch. 9 - Payback and Internal Rate of Return [LO2, 5] A...Ch. 9 - Prob. 10CRCTCh. 9 - Capital Budgeting Problems [LO1] What difficulties...Ch. 9 - Prob. 12CRCTCh. 9 - Modified Internal Rate of Return [LO6] One of the...Ch. 9 - Net Present Value [LO1] It is sometimes stated...Ch. 9 - Internal Rate of Return [LO5] It is sometimes...Ch. 9 - Calculating Payback [LO2] What is the payback...Ch. 9 - Calculating Payback [LO2] An investment project...Ch. 9 - Calculating Payback [LO2] Siva, Inc., imposes a...Ch. 9 - Calculating Discounted Payback [LO3] An investment...Ch. 9 - Calculating Discounted Payback [LO3] An investment...Ch. 9 - Calculating AAR [LO4] Youre trying to determine...Ch. 9 - Calculating IRR [LO5] A firm evaluates all of its...Ch. 9 - Calculating NPV [LO1] For the cash flows in the...Ch. 9 - Calculating NPV and IRR [LO1, 5] A project that...Ch. 9 - Calculating IRR [LO5] What is the IRR of the...Ch. 9 - Prob. 11QPCh. 9 - NPV versus IRR [LO1, 5] Garage, Inc., has...Ch. 9 - Prob. 13QPCh. 9 - Problems with IRR [LO5] Light Sweet Petroleum,...Ch. 9 - Prob. 15QPCh. 9 - Problems with Profitability Index [LO1, 7] The...Ch. 9 - Comparing Investment Criteria [LO1, 2, 3, 5, 7]...Ch. 9 - NPV and Discount Rates [LO1] An investment has an...Ch. 9 - MIRR [L06] RAK Corp. is evaluating a project with...Ch. 9 - Prob. 20QPCh. 9 - Prob. 21QPCh. 9 - Cash Flow Intuition [LO1, 2] A project has an...Ch. 9 - Payback and NPV [LO1, 2] An investment under...Ch. 9 - Prob. 24QPCh. 9 - NPV Valuation [LO1] The Yurdone Corporation wants...Ch. 9 - Problems with IRR [LO5] A project has the...Ch. 9 - Problems with IRR [LO5] McKeekin Corp. has a...Ch. 9 - Prob. 28QPCh. 9 - Prob. 1MCh. 9 - Prob. 2MCh. 9 - Bullock Gold Mining Seth Bullock, the owner of...
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
- What is the optimal conversion size for cash? a. 41,335 b. 58,457 c. 60,000 d. 82,670arrow_forward[EXCEL] Net present value: Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses an 18 percent discount rate for projects like this, should management go ahead with the project? Please use excel Year Cash Flow 0 −$3,300,000 1 875,123 2 966,222 3 1,145,000 4 1,250,399 5 1,504,445arrow_forwardB. Problem: A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 3 Project A -S700 S500 $300 S100 Project B -S700 s100 S300 S600 a. Calculate the projects' NPVS and IRRS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exchusive, which project should be chosen?arrow_forward
- ces A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 161,000 0 55,000 1 84,000 2 68,000 3 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 12 percent, should the firm accept the project?arrow_forward2. Calculating Payback [LO2] An investment project provides cash inflows of $745 per year for eight years. What is the project payback period if the initial cost is $1,700? What if the initial cost is $3,30o? What if it is $6,100?arrow_forwardNote: PLEASE YOU DONT USE EXCELarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY