Question

An investment project generates after-tax cash flows of $5,000 per year for the next 10 years....

An investment project generates after-tax cash flows of $5,000 per year for the next 10 years. Suppose the payback period for the project is 5 years and the appropriate discount rate is 15 percent. What is the initial cost of the project?

a. $25,000 b. $32,167 c. $30,000 d. $16,761

Please provide the formula you used and numbers you plugged in to get the answer.

Homework Answers

Answer #1

Answer to Question is Option"a" i.e "$25,000"

We are considering the Payback Period without the effect of Discounting Factor as the Payback Period with Discounting Factor is called "Discounting Payback Period".

Since the Pay Back Period is 5 Years, it means the Amount Invested as "Initial Cost of the Project" will be recovered at the end of 5 Years, if we have the after-tax cash inflows $5000 per year then we will recover $5000 Per Year X 5 Years = $ 25,000 in total. So the formula is "After-Tax Cash Inflow X Payback Period"

1. After-Tax Cash Inflows = $ 5,000

2. Payback Period = 5 Years

Initial Cost of Projects = $ 25,000 ($5,000 X 5)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An investment project has annual cash inflows of $5,100, $3,200, $4,400, and $3,600, for the next...
An investment project has annual cash inflows of $5,100, $3,200, $4,400, and $3,600, for the next four years, respectively. The discount rate is 15 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,000? b. What is the discounted payback period for these cash flows if the initial cost is $7,100? c. What is the discounted payback period for these cash flows if the initial cost is $10,100?
project that requires an initial investment of $100,000 and generates the following cash flows: YEAR CASH...
project that requires an initial investment of $100,000 and generates the following cash flows: YEAR CASH FLOWS 1                   30,000 2                   35,000 3                   40,000 4                   20,000 5                   19,000 If the cost of capital is 8.5% have a discounted payback period of _______________ Seleccione una: 3.856 years 2.875 years 3.665 years 2.856 years 3.875 years not enough data to answer
A project that requires an initial investment of $100,000 and generates the following cash flows: YEAR...
A project that requires an initial investment of $100,000 and generates the following cash flows: YEAR CASH FLOWS 1                   30,000 2                   35,000 3                   40,000 4                   20,000 5                   19,000 If the cost of capital is 8.5% have a discounted payback period of _______________
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...
Suppose a project generates positive cash flows for the next 12 years and the project’s NPV...
Suppose a project generates positive cash flows for the next 12 years and the project’s NPV is $110,000 when discount rate is 6%. Also suppose that the IRR=8.7%. Which of the following may be a possible value for NPV when discount rate is 7.4%? A. -$25,000 B. 0 C. $25,000 D. $125,000 E. None of the above
an investment project has annual cash inflows of 4,800,5,900,6,700 and 8,000 for the next four years...
an investment project has annual cash inflows of 4,800,5,900,6,700 and 8,000 for the next four years respectively and a discount rate of 15 percent. what is the discounted payback period for these cash flows if the intiial cost is 8000
An investment project has annual cash inflows of $6,100, $7,200, $8,000 for the next four years,...
An investment project has annual cash inflows of $6,100, $7,200, $8,000 for the next four years, respectively, and $9,300, and a discount rate of 17 percent. What is the discounted payback period for these cash flows if the initial cost is $9,500?
An investment project has annual cash inflows of $4,400, $5,500, $6,300 for the next four years,...
An investment project has annual cash inflows of $4,400, $5,500, $6,300 for the next four years, respectively, and $7,600, and a discount rate of 11 percent. What is the discounted payback period for these cash flows if the initial cost is $7,500?
You have just purchased an investment that generates the following cash flows for the next four...
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 11.9 percent, compounded annually. End of year 1.   $2,335 2.   $916 3.   $4,996 4.   $3,400 What is the present value of this investment if 11.9 percent per year is the appropriate discount rate? Round the answer to two decimal places. Thank you.
An investment project costs $14,600 and has annual cash flows of $3,500 for six years.   ...
An investment project costs $14,600 and has annual cash flows of $3,500 for six years.    a. What is the discounted payback period if the discount rate is zero percent?    b. What is the discounted payback period if the discount rate is 5 percent?    c. What is the discounted payback period if the discount rate is 19 percent?