Question

Offshore Drilling Products, Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available. |

Year | Cash Flow A | Cash Flow B | ||

0 | –$ | 49,000 | –$ | 94,000 |

1 | 19,000 | 21,000 | ||

2 | 25,400 | 26,000 | ||

3 | 21,000 | 33,000 | ||

4 | 7,000 | 246,000 | ||

Requirement 1: |

What is the payback period for each project? |

Payback period | |

Project A | years |

Project B | years |

Requirement 2: |

Should it accept either of them? |

(Click to select)Accept project B and reject project A Accept both projects A and B Accept project A and reject project BReject both projects A and B |

Answer #1

Offshore Drilling Products,
Inc., imposes a payback cutoff of three years for its international
investment projects. Assume the company has the following two
projects available.
Year
Cash Flow A
Cash Flow B
0
–$
49,000
–$
94,000
1
19,000
21,000
2
25,400
26,000
3
21,000
33,000
4
7,000
246,000
Requirement
1:
What is the payback period for each project? (Enter
rounded answers as directed, but do not use the rounded numbers in
intermediate calculations. Round your answers to 2...

Global Toys, Inc., imposes a payback cutoff of three years for
its international investment projects. Assume the company has the
following two projects available.
Year
Cash Flow A
Cash Flow B
0
–$
48,000
–$
93,000
1
18,500
20,500
2
24,800
25,500
3
20,500
33,500
4
6,500
247,000
What is the payback period for each project? (Do not
round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
Payback
period
Project A
years
Project B
years

Stenson, Inc., imposes a payback cutoff of three years for its
international investment projects. Assume the company has the
following two projects available.
Year
Cash Flow A
Cash Flow B
0
–$
47,000
–$
92,000
1
18,000
20,000
2
24,200
25,000
3
20,000
34,000
4
6,000
248,000
What is the payback period for each project? (Do not
round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)

Calculating Payback. Tulip Mania, Inc., imposes
a payback cutoff of 3 years for its international investment
projects. They are currently evaluating the following two
projects:
1. Using the following table please find the payback period for
project A, and for project B
2. What project should Tulip Mania accept.
3. Please show and explain the work using a finnancial
calculator.
Year
Cashflow (A)
Cashflow (B)
0
-70000
-100000
1
48000
10000
2
25000
25000
3
15000
40000
4
5000
100000

5 Macy's uses the Payback Period method for evaluating its
projects. The Payback Period cut-off rule is 3 years. Macys is
considering the following project: Cash Flow for Year Project A 0
-$75,000 1 $33,000 2 $36,000 3 $19,000 4 $9,000 Required: a) Should
macys accept or reject Project A why or why not?

Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 9
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time:
0
1
2
3
Project A Cash Flow
-21,000
11,000
31,000
2,000
Project B Cash Flow
-31,000
11,000
21,000
51,000
Use the NPV decision rule to evaluate these...

What is the payback period on each of the following
projects?
Given that you wish to use the payback rule with a cutoff
period of three years, which projects would you accept?
Cash Flows, $
Project
C0
C1
C2
C3
C4
A
-10,000
+1,000
+1,000
+2,000
+6,000
B
-5,000
0
+1,000
+1,500
+3,000
C
-2,000
+2,000
+4,000
+1,000
+5,000

Here are the expected cash flows for three projects:
Project Year 0 1 2 3
4
A -5,400 +1,100 +1,100
+3,200 0
B -1,400 0 +1,400
+2,200 +3,200
C -5,400 +1,100 +1,100
+3,200 +5,200
a. what is the payback period on each of the projects?
b. If you use a cutoff period of 2 years, which projects would
you accept?
c. If you use a cutoff...

Here are the expected cash flows for three projects:
Cash Flows (dollars)
Project
Year:
0
1
2
3
4
A
−
6,300
+
1,325
+
1,325
+
3,650
0
B
−
2,300
0
+
2,300
+
2,650
+
3,650
C
−
6,300
+
1,325
+
1,325
+
3,650
+
5,650
a. What is the payback period on each of the
projects?
b. If you use a cutoff period of 2 years, which
projects would you accept?
Project A
Project B...

Timeline Manufacturing Co. is evaluating two projects. The
company uses payback criteria of three years or less. Project A has
a cost of $845,140, and project B’s cost is $1,190,400. Cash flows
from both projects are given in the following table.
Year
Project A
Project B
1
$86,212
$586,212
2
313,562
413,277
3
427,594
231,199
4
285,552
What are their discounted payback periods? (Round
answers to 2 decimal places, e.g. 15.25. If discounted payback
period exceeds life of the project,...

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