The straight-line method of depreciation will be used. Year 0 1 2 3 Cash Flows -$750 $300 $325 $350 a) 1.91 years b) 2.12 years c) 2.36 years... Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $20,330. Advantages and disadvantages of the payback period method, 4. Why or why not? The payback period for the following set of cash flows is years. 4. 2.89 years 15,000 C. 3.08 years 23.000 D. 3.24 years 35,000 E. Never 25,000. What is a payback period? The movie is expected to cost $10.9 million upfront and take a year to make. Your company is evaluating two projects with the below cash flow expectations. am just very happy to have got the concept behind payback method. Year 0: -$3,300 Year 1: $450 Year 2: $1,200 Year 3: $2,500 Year 4: $1,100, What is the payback period of the following set of cash flows? | Project A | | | | | | |TIME|0|1|2|3|4|5 |Cash Fl... Payback A project has an initial cost of $49,800, expected net cash inflows of $14,000 per year for 8 years, and a cost of capital of 12%. The company is. Year Cash Flow 0 $ 5,800 1 1,500 2 1,700 3 2,100 4 1,600. $2000 The payback period for Alternative A is 3.125 years (i.e., 3 years plus 1.5 Project X has the following cash flows. What is the regular payback period for these two projects? The games would cost a total of $365,000, have a fifteen-year useful life, and have a t... Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under The Yogurt Place name. b)Avarage rate of return. The rate is 12% , what is the worst possible cash flow (NPV) from this investment? 5k period for Alternative B is calculated as follows: As The length of time a firm must wait to recoup the money it has invested in a project is called the: A. internal return period. 50,000 Payback period Project L costs $65,000, its expected cash inflows are $15,000 per year for 10 years, and its WACC is 13%. Explain the relative significance of the unadjusted payback period in this decision situation. If the company has the following two projects available, should it... Mimis Company is considering a capital investment of $275,000 in new equipment. Tri Star, Inc., has the following mutually exclusive projects: Year Project A Project B 0 -$13100 -$8500 1 7300 3200 2 6300 2700 3 2,100 5100 a. But according to payback method, both the projects are equally desirable because both have a payback period of 5 years ($5,000/$1,000). is considering Project A . Initial Outlay $18,500 Year 1 $5,070 Year 2 $5,210 Year 3 $5,670 Year 4 $7,230 The answer should be calculated to the two decimal places. Explain. Since Alternative B Investment 20000 to obtain 5%interest in a rental property. Year 0 -$4,400 Year 1 $900 Year 2 $2,500 Year 3 $3,800 Year 4 $1,700. When calculating Net annual cash inflow should one include the interest rate in the calculation if the investment is financed with debt? 1. If the interest rate is 6%, what is the project's NPV? 25,000 Installation costs and freight charges were $3,550 and $... Linkin Corporation is considering purchasing a new delivery truck. Round answer... An investment project provides cash inflows of $630 per year for eight years. market price in 1000, equal to par value? (Do n... An investment project provides cash inflows of $1,000 per year for eight years. Earn Transferable Credit & Get your Degree. a) 2.75 years b) 3.50 years c) 3.75 years d) 4.50 years e) 4.75 years. (Enter 0 if the project never pays back. Required: Compute payback period of machine X and conclude whether or not the machine would be purchased if the maximum desired payback period of Delta company is 3 years. What is the payback period for a project with the following cash flows? The incremental net operating income and incremental net cash... A company with $1,145,000 in operating assets is thinking of purchasing a machine that costs $95,500 and which is expected to reduce operating costs by $32,000 each year. (Round your answer to. Find the payback period for the following project. Paula bought a machine costing $1,000, which will produce cash inflows of $1,400 over the next 4 years. What if the initial cost is $4,300? The following are the cash flows of two projects: What is the payback period of each project? $10000. What are three potential flaws with the regular payback method? It is expected to produce the following net cash flows. year 3. The hoist has an 8-year life and an estimated salvage value of $3,300. The after-tax cash flows are expected to be $83 each year for 13 years. All other trademarks and copyrights are the property of their respective owners. $2500 (Round your answer to 2 decimal places. 3 30 000 30 000 Hello – what method do we use when we are incurring continuous cash out flows? For example, if a company wants to recoup the cost of a machine within 5 years of purchase, the maximum desired payback period of the company would be 5 years. Annual net. These reductions in... An investment project provides cash inflows of $935 per year for eight years. The sign will cost $4,700 and will be posted for one year. (200 word response). Boy-Boy , Incorporated , is considering the purchase of a machine that would cost R240,000 and would last for 5 years, at the end of which, the machine would have a salvage value of R48,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in yea... Any project deemed acceptable using the discounted payback period will also be acceptable if using the traditional payback period. The system is expected to generate positive cash flows over the next five years in the amounts of $60,000 in year on... FED Construction Co. is considering a new inventory system that will cost $975,000. Find the Payback for the following Project X. (c... Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. B. cash flows occurring after the payback are ignored. The time value of money is 3 percent. 1 $3,375 11,375 The investment in this project is therefore not desirable. All three have an initial investment of $800,000. payback method of evaluating two investment alternatives has its limitation: Compute the Cash Payback period for the project based on the original projections. a. Does it matter if we use nominal cash flows or real cash flows to calculate payback period? Explain.... What are the three potential flaws with the regular payback method? 30000 Find the payback period for the following project Project X. Which of the following are disadvantages of the payback period decision rule? The payback period for the $28,575 software package is three years, and the software's expected life is eight years. The payback period is important for the firms for which liquidity is very important. 20,000. Capital Budgeting deals with: (A) Long-term Decisions. If the... Offshore Drilling Products, Inc.., imposes a payback cutoff of three years for its international investment projects. I appreciate the help on bayback. We can compute the payback period by computing the cumulative net cash flow as follows: Payback period = 3 + (15,000*/40,000)= 3 + 0.375= 3.375 Years, *Unrecovered investment at start of 4th year:= Initial cost – Cumulative cash inflow at the end of 3rd year= $200,000 – $185,000= $15,000. What are the primary strengths and weaknesses of the payback approach in capital budgeting? Vilas Company is considering a capital investment of $190,300 in additional production facilities. B 400 450 100, QUESTION 3 (Ignore income taxes in this problem) (20 marks) The foll... A project has the following cash flows. What is the project payback period if the initial cost is $3,000? What is the profitability index for Project A. The annual net operating income from the project would be $10... A project has an initial cost of $155,000. What is the payback period? In such situations, we need to compute the cumulative cash inflow and then apply the following formula: An investment of $200,000 is expected to generate the following cash inflows in six years: Year 1: $70,000Year 2: $60,000Year 3: $55,000Year 4: $40,000Year 5: $30,000Year 6: $25,000. (... Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. Year 1 $5,000 Year 2 $10,000 Year 3 $10,000 O 3 years O 2 years O 2.2, What is the payback period for a project with the following cash flows? Your company evaluates proposals using a 2.5-year payback period. Company XYZ Find the Payback for the following Project X. What is the project's payback? Sm... Robinson Hardware is adding a new product line that will require an investment of $1,454,000. (b) Bacchante the accounting rate... a. It is expected to generate $7500 of annual cash revenues and $1500 of annual cash expenses. What is the project payback period if the initial cost is $2,100? The required rate of return on projects of both of their risk class is 9 percent, and tha... Belmont Corp is considering the purchase of a new piece of equipment. The... A) What are the two main disadvantages of discounted payback? Estimate cash receive per year is 6000 and 8000 from the interest of 5%.Time 10years.income tax 25%. Given below are the cash flows of four projects, A, B, C, and D. Assume that the cash flows are equally distributed over the year for Payback Period calculations. A significant advantage of the payback period is that it? 2.ARR Consider the following cash flows: Year 0 -$5,100 Year 1 $1,500 Year 2 $2,600 Year 3 $1,300 Year 4 $1,000. Stern Associates is considering a project that has the following cash flow data. It is expected to generate $7,500 of annual cash revenues and $1,500 of annual cash expenses. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. Assume the company has the following two projects available. The discount rate is 8%. total 36,875 36,875 a) pay back period. Calculate the payback period of the project. Unlike net present value and internal rate of return method, payback method does not take into account the time value of money. Name several advantages and disadvantages of using this method. Project A requires a $480,000 investment for new machinery with a three-year life and no salvage value. Assume you want your money back within 2 years. the time value of money is not considered. b. requiring an estimate of the marginal cost of capital. Answer the following questions: 1. One drawback of the payback criterion for evaluating projects is that there this method does not take account of cash flows beyond the payback p... Beyer Company is considering the purchase of an asset for $180,000. Estimated yearly cash flow is 25 percent of the initial cost. The MARR is 10%. Find the payback period for the following project. 4 $2500. These reductions in cost o... A company with $955,000 in operating assets is considering the purchase of a machine that costs $57,000 and which is expected to reduce operating costs by $11,000 each year. Test your understanding with practice problems and step-by-step solutions. You analyze Project W and decide that Year 1 free cash flow is $100,000 too low, and Year 3 free cash flow i... A project with a payback period of four years is acceptable as long as the company's target payback period is greater than or equal to four years.
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