Question

Two new software projects are proposed to a young, start-up company. Project #1 will cost $250,000 to develop and is expected to have an annual net cash flow of $60,000 over the first 5 years of the project. Project #2 will cost $200,000 to develop and is expected to have an annual cash flow of $50,000 over the first 5 years of the project. The company is very concerned about their cash flow.

- Using the payback period method, which project would you select for funding and why?

- The project life for each project is estimated to be 8 years,
with the cash flow dropping by $10,000 per year over the last 3
years for each project. Over that period the company has a minimum
15% required rate of return. The NPV for Project #1 is negative
*$2409*and for Project #2, it is $2717.

Which of the two projects would you fund and why?

Answer #1

A company is trying to decide between two projects. Project
Musky will cost $250,000 to develop and have a net annual cash flow
of $45,000. Project Perch will cost $300,000 to develop and have a
net annual cash flow of $52,000. The company makes decisions based
on payback period. Which project should they pick and why? For the
one they should not pick, what would the net annual cash flow need
to be to make it equal to the one...

As the VP of Engineering of a young startup that sells tickets
for major concerts and sporting events, your team has approached
you about two new projects they would like start. Your budget can
only afford one, so you must prioritize. In the first you must
invest $50, 000, but will receive $10,000 in annual cash flow. In
the second project you must double the upfront invest $100,000, but
the annual cash flow will be $25,000. Since you do not...

Suppose a company has proposed a new 5-year project. The project
has an initial outlay of $169,000 and has expected cash flows of
$38,000 in year 1, $45,000 in year 2, $60,000 in year 3, $69,000 in
year 4, and $77,000 in year 5. The required rate of return is 13%
for projects at this company. What is the discounted payback for
this project? (Answer to the nearest tenth of a year, e.g. 3.2)

A software developer is planning to develop new software for
over two years. This requires a per year cost of $830,000. One
payment is made immediately while the second payment is to be made
at the end of two years. Upon the release of the software, it is
estimated that it will generate an annual cash flow of $1.20
million for three years. Given the cost of capital of 10 percent,
calculate the NPV of this project.
Select one:
$950,349...

The two projects are as follows. Discount rate = 10%.
Project
X Project Y
Year Cash-Flow
Cash-Flow
0
-$100,000 -$100,000
1
50,000 10,000
2
40,000 30,000
3 30,000 40,000
4.
10,000
60,000
Calculate the payback period of project X
1.33 years
2.33 years
3.33 years
4.33 years
Calculate the crossover rate.
6.93%
6.58%
10.00%
7.17%
Imagine that discount is 5%, and the two projects are mutually
exclusive, which project shall you choose?...

1.-You are evaluating a project that will cost $499,000, but is
expected to produce cash flows of $123,000 per year for 10 years,
with the first cash flow in one year. Your cost of capital is 10.6%
and your company's preferred payback period is three years or
less.
a. What is the payback period of this project?
b. Should you take the project if you want to increase the value
of the company?
2.- You are choosing between two projects....

You are considering a new project that will cost $750,000. The
project is expected to generate positive cash flows over the next
four years in the amounts of $350,000 in year one, $325,000 in year
two, $250,000 in year three, and $280,000 in year four. Your
required rate of return is 8%. What is the discounted payback
period of the project?

An investment project requires a net investment of $100,000.
The project is expected to generate annual net cash inflows of
$28,000 for the next 5 years. The firm's cost of capital is 12
percent. Determine whether you would accept or reject the project
using the discounted payback period method. The company rejects
projects that exceed a discounted payback period of over 3
years.
4.94 years, Reject the
project
2.5 years, accept
4.09 years, accept
1.43 years, accept
You cannot calculate...

A company is considering a new project that will cost $750,000.
The project is expected to generate positive cash flows over the
next four years in the amounts of $300,000 in year one, $325,000 in
year two, $150,000 in year three, and $180,000 in year four. The
required rate of return is 8%. What is the project’s payback
period?
2.60 years 2.83 years 2.63 years 2.33 years 2.50 years

Suppose a company has proposed a new 5-year project. The project
has an initial outlay of $23,000 and has expected cash flows of
$3,000 in year 1, $5,000 in year 2, $6,000 in year 3, $7,000 in
year 4, and $8,000 in year 5. The required rate of return is 15%
for projects at this company. What is the Payback for this project?
(Answer to the nearest tenth of a year, e.g. 3.2)

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