Question

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 accept this project based on the discounted payback period criterion?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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 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 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?...
Senior management asks you to recommend a decision on which project(s) to accept based on the...
Senior management asks you to recommend a decision on which project(s) to accept based on the cash flow forecasts provided. Relevant information: The firm uses a 3-year cutoff when using the payback method. The hurdle rate used to evaluate capital budgeting projects is 15%. The cash flows for projects A, B and C are provided below. Project A Project B Project C Year 0 -30,000 -20,000 -50,000 Year 1 0 4,000 20,000 Year 2 7,000 5,000 20,000 Year 3 20,000...
An investment project costs $10,000 and has annual cash flows of $3,000 for six years. What...
An investment project costs $10,000 and has annual cash flows of $3,000 for six years. What is the discounted payback period if the discount rate is zero percent? (Do not round intermediate calculations. Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period             years What is the discounted payback period if the discount rate is 6 percent? (Do not round intermediate calculations. Enter 0 if the project never pays...
Question 4 (Total marks =15) You are evaluating an investment project, Project XX, with the following...
Question 4 (Total marks =15) You are evaluating an investment project, Project XX, with the following cash flows: Period Cash Flow 0 -$200,000 1 $65,000 2 $65,000 3 $65,000 4 $65,000 5 -$65,000 Calculate the following: (a). Payback period ( 2 marks) (b). Calculate the discounted cash flows for each year, assuming a 10% discount rate. (c) Discounted payback period, assuming a 10% cost of capital. (d) .Net present value, assuming a 10% cost of capital. (e). Profitability index, assuming...
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?
An investment project requires a net investment of $100,000. The project is expected to generate annual...
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...
What information does the payback period provide? Suppose Praxis Corporation’s CFO is evaluating a project with...
What information does the payback period provide? Suppose Praxis Corporation’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $300,000 Year 2 $450,000 Year 3 $400,000 Year 4 $450,000 If the project’s weighted average cost of capital (WACC) is 10%, what is its NPV? A.) $302,510 B.) $332,761 C.) $317,636 D.) $287,385 Which...
An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next...
An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next four years, respectively. The discount rate is 14 percent.    1.What is the discounted payback period for these cash flows if the initial cost is $5,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      Discounted payback period years    2.What is the discounted payback period for these cash flows if the initial cost is $7,200? (Do...
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax...
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$9,000 $3,000 $3,000 $3,000 $3,000 $3,000 Project N -$27,000 $8,400 $8,400 $8,400 $8,400 $8,400 Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M:    $   Project N:    $   Calculate IRR for each project. Do not round intermediate calculations. Round your answers to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT