Question

Suppose your firm is considering investing in a project with the accompanying cash flows, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 4 and 4.5 years, respectively. Time Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cash Flow -$125,000 -$75,650 $75,000 $49,000 $115,000 $81,850 What is the Profitability Index? Would you accept or reject the project? Why?

Answer #1

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 7 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
–$5,300 $1,300 $2,500 $1,700 $1,620 $1,500 $1,300

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 the required rate of return on
projects of this risk class is 7 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:
−$5,100 $1,240 $2,440 $1,640 $1,560 $1,440 $1,240 Use the payback
decision rule to evaluate this project

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 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 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...

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...

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 8 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:
-$5000
$1230
$2430
$1630
$1550
$1430
$1230
Use the payback decision rule to evaluate this project. Should
this project be accepted...

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 10 percent, and that the maximum
allowable payback and discounted payback statistics for the project
are three and a half and four and a half years, respectively. Use
the IRR decision to evaluate this project; should it be accepted or
rejected?
Time
0
1
2
3
4
5
6
Cash Flow...

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
7 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:
−$5,100
$1,240
$2,440
$1,640
$1,560
$1,440
$1,240
Use the payback decision rule to evaluate this project.
(Round your answer to 2...

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