Question

**Pay Back Method**

What is the payback period for the following project?

Year Inflow/(Outflow)

($38,000)

$ 8,000

$ 9,000

$ 12,000

$ 7,000

$ 8,000

$ 5,000

7 $ 3,000

Answer #1

Pay Back Method
What is the payback period for the
following project?
Year
Inflow/(Outflow)
($38,000)
$ 8,000
$ 9,000
$ 12,000
$ 7,000
$ 8,000
$ 5,000
$ 3,000

7) A company uses the payback
method to evaluate capital budgeting projects. It is
currently considering projects A, B and C.
Project
A Project
B Project
C
Initial cost (cash
outflow) $10,000 $10,000 $10,000
Cash inflows:
1st
year $ 1,000 $9,000 $ 5,000
2nd year
$9,000 $1,000 $5,000
3rd year $15,000
- 0
- $35,000
a) Find the payback period for
each of the above capital budgeting projects. Label the
payback period for each project so I can see which payback period
goes with which project.
b) What two major weaknesses of
the payback method are illustrated by...

Calculate the payback for a project with an initial investment
of $12,000 and these following csh inflows:
Year
Cash Inflow
1
$4,000
2
$3,000
3
$2,000
4
$6,000
5
$1,000
6
$7,000

Payback period.
Given the cash flow of two projectslong dash—A and Blong
dash—and using the payback period decision model, which
project(s) do you accept and which project(s) do you reject if you
have a 3-year cutoff period for recapturing the initial cash
outflow? For payback period calculations, assume that the cash
flow is equally distributed over the year.
Cash Flow
A
B
Cost
$14,000
$90,000
Cash flow year 1
$7,000
$36,000
Cash flow year 2
$7,000
$27,000
Cash flow...

Compute the Payback period, NPV, IRR, and PI and give
accept/reject decision for the following project. The cost of
capital is 10 percent. Assume the policy payback period is 3
years.
Year
Cash Inflow (Outflow)
0
(400)
1
100
2
200
3
200
4
300

Calculating Discounted Payback- An investment project has annual
cash inflows of $5,000, $5,500, $6,000, and $7,000, and a discount
rate of 11 percent. What is the discounted payback period for these
cash flows if the initial cost is $8,000? What if the initial cost
is $12,000? What if it is $16,000?

Exercise 13-1 Payback Method [LO13-1]
The management of Unter Corporation, an architectural design
firm, is considering an investment with the following cash
flows:
Year
Investment
Cash Inflow
1
$
75,000
$
6,000
2
$
7,000
$
12,000
3
$
18,000
4
$
17,000
5
$
20,000
6
$
18,000
7
$
16,000
8
$
14,000
9
$
10,000
10
$
13,000
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash...

You are considering three independent projects, Project A,
Project B and Project C. Given the following cash flow information,
calculate the payback period for each.
Year
Project A
Project B
Project C
0 (Investment)
($ 900)
($ 9,000)
( $7,000)
1
$ 600
$ 5,000
$ 2,000
2
$ 300
$ 3,000
$ 2,000
3
$ 200
$ 3,000
$ 2,000
4
$ 100
$ 3,000
$ 2,000
5
$ 500
$ 3,000
$ 2,000

QUESTION 21
Using the following project cashflows, determine the payback
period.
ICO:
$27,000
year ΔNOCFt
1
$9,000
2 $10,000
3
$9,000
4
$8,000
2.98 years
3.02 years
3.11 years
2.89 years
none of these

5 Macy's uses the Payback Period method for evaluating its
projects. The Payback Period cut-off rule is 3 years. Macys is
considering the following project: Cash Flow for Year Project A 0
-$75,000 1 $33,000 2 $36,000 3 $19,000 4 $9,000 Required: a) Should
macys accept or reject Project A why or why not?

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