Question

You are evaluating a project that will cost $ 456 comma 000​, but is expected to...

You are evaluating a project that will cost $ 456 comma 000​, but is expected to produce cash flows of $ 124 comma 000 per year for 10 ​years, with the first cash flow in one year. Your cost of capital is 11.2 % and your​ company's preferred payback period is three years or less. a. What is the payback period of this​ project?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Payback period = The year in which the cumulative cash flow was last negative + (the positive value of the cumulative cash flow in that year) / (cash flow in the next year)

Payback period = 3 + 84,000/124,000

Payback period = 3.6774193548 Years

The company should not accept this project because the payback period (3.68 years) is greater than the preferred payback period (3 years).

Screenshot with formulas

Can you please upvote? Thank You :-)=

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are evaluating a project that will cost $ 515, 000 ​, but is expected to...
You are evaluating a project that will cost $ 515, 000 ​, but is expected to produce cash flows of $ 122 comma 000 per year for 10 ​years, with the first cash flow in one year. Your cost of capital is 11.1 % 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?...
1.-You are evaluating a project that will cost $499,000​, but is expected to produce cash flows...
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....
im evaluating a project that will cost 500,000, but is expected to produce cash flows of...
im evaluating a project that will cost 500,000, but is expected to produce cash flows of 175,000 per year for 10yrs, with the first cash flow in one year. cost of capital is 11%. what is the discounted payback period of this project?
Middlefield Motors is evaluating a project that would cost 6,200 dollars today. The project is expected...
Middlefield Motors is evaluating a project that would cost 6,200 dollars today. The project is expected to have the following other cash flows: 2,350 dollars in 1 year, -2,480 dollars in 3 years, and 7,540 dollars in 4 years. The cost of capital of the project is 5.64 percent. What is the net present value of the project? They are also evaluating a project that would cost 4,360 dollars today. The project is expected to produce annual cash flows of...
You are evaluating an investment project costing $11,800 initially. The project will provide $3,000 in after-tax...
You are evaluating an investment project costing $11,800 initially. The project will provide $3,000 in after-tax cash flows in the first year and $5,000 each year thereafter for 4 years. The maximum payback period for your company is 3 years. Your company's cost of capital is 14%. 1)What is the payback period for this project? 2)Should your company accept this project based on the payback period criterion? 3)What is the discounted payback period for this project? 4) Should your company...
Stone Inc. is evaluating a project with an initial cost of $11,500. Cash inflows are expected...
Stone Inc. is evaluating a project with an initial cost of $11,500. Cash inflows are expected to be $1,500, $1,500 and $13,000 in the three years over which the project will produce cash flows. If the discount rate is 11%, what is the payback, net present value and profitability index of the project?
PROBLEM 2 Winston Clinic is evaluating a project that costs $52,125 and has expected net cash...
PROBLEM 2 Winston Clinic is evaluating a project that costs $52,125 and has expected net cash flows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent. a. What is the project's payback? b. What is the project's NPV? Its IRR? c. Is the project financially acceptable? Explain your answer.
What information does the payback period provide? Suppose you are evaluating a project with the expected...
What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $275,000 Year 2 $450,000 Year 3 $425,000 Year 4 $500,000 If the project’s weighted average cost of...
You are evaluating an investment project costing $39,000 initially. The project will provide $3,000 in after-tax...
You are evaluating an investment project costing $39,000 initially. The project will provide $3,000 in after-tax cash flows in the first year, $4,000 in the second year and $8,000 each year thereafter for 10 years. The maximum payback period for your company is 7 years. 1. What is the payback period for this project? 2. Should your company accept this project?
You are considering a new project that will cost $750,000. The project is expected to generate...
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?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT