Question

   (8 marks) Silky Smooth Studio (SMS) is considering investing in a movie project. The expected...

   Silky Smooth Studio (SMS) is considering investing in a movie project. The expected cash flows of the project are given in the table below.
Year   0   1   2   3
Cash Flow   -$100,000   $45,000   $45,000   $45,000
  
The required return of the project is 12 percent.
a.   Using Net Present Value as the decision criterion, should SMS invest in this movie? Explain carefully.                          
b.   What is the discounted payback period of this project?           

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

I am suggesting SMS to invest in this movie, because SMS can earn profit with this investment. the calculation shown above.

The Discounted payback period is 2 year and 9 months.

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
Suppose your firm is considering investing in a project with the cash flows shown as follows,...
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively Time                                    0                     1             2                          3                4                                5 Cash Flow                        -100,000        30,000        45,000            55,000          30,000                    10,000 Calculate the payback and use the payback decision rule...
Suppose your firm is considering investing in a project with the cash flows shown as follows,...
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively. . Time                          0                               1                                2                                         3                              4                                            5 Cash Flow             -100,000                   30,000                       45,000                                 55,000                     30,000                                  10,000 Use the IRR decision rule to evaluate this project; should it be...
4.   Suppose your firm is considering investing in a project with the cash flows shown as...
4.   Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and .25 years respectively. Time Years   0       1   2   3   4   5   6 Cash Flow   -150,000   30,000   50,000   45,000 25000   35000   10000       Use the payback decision rule to evaluate...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow -1,100 80 520 720 720 320 720 Use the discounted payback decision rule to evaluate this project; should it be accepted...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.   Time 0 1 2 3 4 5 6   Cash Flow -1,030 130 470 670 670 270 670 Use the payback decision rule to evaluate this project; should it be accepted or...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.   Time 0 1 2 3 4 5 6   Cash Flow -980 180 420 620 620 220 620 Use the NPV decision rule to evaluate this project; should it be accepted or...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: –$5,200 $1,250 $2,450 $1,650 $1,650 $1,450 $1,250 Use the discounted payback decision rule to evaluate this project. (Round your answer to...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6   Cash Flow -1,030 130 470 670 670 270 670 Use the discounted payback decision rule to evaluate this project; should it be accepted...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6   Cash Flow -1,030 130 470 670 670 270 670 Use the discounted payback decision rule to evaluate this project; should it be accepted...
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow -1,150 30 570 770 770 370 770 Use the discounted payback decision rule to evaluate this project; should it be accepted...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT