Question

A project has the following cash flows. Should the company accept this project based on the Payback Period if the firm requires a payback of 3.0 years?

Year Cash Flow

0 -$28,000

1 11,600

2 11,600

3 6,500

4 6,500

Yes, because the Payback Period is 3.33 years |

Yes, because the Payback Period is 2.74 years |

No, because the Payback Period is 2.74 years |

Yes, because the Payback Period is 2.49 years |

Answer #1

Year |
0 |
1 |
2 |
3 |
4 |

Cashflow | (28,000) | 11,600 | 11,600 | 6,500 | 6,500 |

Cumulative cashflow | (28,000) | (16,400) | (4,800) | 1,700 | 8,200 |

**Payback Period = last period
with negative cash flow (A) + (absolute value of cumulative cash
flow at the end of the period A / total cash flow during the period
after A)**

Here year 2 is the last period with negative cash flow .

Payback Period = 2 + (4800/6500)

= 2 +.74

**Payback Period = 2.74
years**

Company **accept** this project, because the
Payback Period is 2.74 years which is lower than the required
payback of 3 years

Compute the Discounted Payback statistic for Project X and
recommend whether the firm should accept or reject the project with
the cash flows shown below if the appropriate cost of capital is 10
percent and the maximum allowable discounted payback is 3 years.
Time: 0 1 2 3 4 5 Cash flow: -1,000 500 480 400 300 150
2.98 years,accept
4.98 years, reject
3.49 years, reject
2.49 years, accept

A company has a project with the following cash flows (in
Millions). The WACC for the company is 7.5%.
year cash flow
1 $(20,000.00)
0 $2,000.00
2 $ 5,000.00
3 $12,000.00
4 $12,000.00
5 $9,000.00
What is the payback period for this project?
A.
2.08 years
B.
3.08 years
C.
4.08 years
D.
3.99 years

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...

Guerilla Radio Broadcasting has a project available with the
following cash flows :
Year | Cash Flow
0 −$14,600
1 6,000
2 7,300
3 5,300
4 5,100
What is the payback period?
A) 2.62
B) 1.75
C) 2.25
D) 3.00
E) 2.49

Compute the Payback statistic for Project X and recommend
whether the firm should accept or reject the project with the cash
flows shown below if the appropriate cost of capital is 12 percent
and the maximum allowable payback is 4 years.
Time:
0
1
2
3
4
5
Cash flow:
-3,100
950
700
850
725
625
Multiple Choice
3.83 years, Reject
2.83 years, Accept
2.83 years, Reject
3.83 years, Accept

Compute the Payback statistic for Project X and recommend
whether the firm should accept or reject the project with the cash
flows shown below if the appropriate cost of capital is 12 percent
and the maximum allowable payback is 4 years.
Time:
0
1
2
3
4
5
Cash flow:
-2,100
350
700
800
750
525

(Discounted payback period) Sheinhardt Wig Company is
considering a project that has the following cash flows: If the
project's appropriate discount rate is 9 percent, what is the
project's discounted payback period? The project's discounted
payback period is nothing years. (Round to two decimal
places.)
YEAR PROJECT CASH FLOW
0 -60,000
1 20,000
2 50,000
3 65,000
4 55,000
5 40,000

Compute the Discounted Payback statistic for Project X and
recommend whether the firm should accept or reject the project with
the cash flows shown below if the appropriate cost of capital is 10
percent and the maximum allowable discounted payback is 3
years.
Time:
0
1
2
3
4
5
Cash flow:
-1,000
400
580
500
400
250
3.42 years, reject
4.72 years, reject
2.42 years, accept
2.72 years, accept

Based on the profitability index (PI) rule, should a project
with the following cash flows be accepted if the discount rate is
8%? Why Year or why not? Cash Flow $18,600 S10,000 I$7,300 I$3,700
2 yes,because the Pl is 1.008 yes; because the Pl is 0.992. yes;
because the Pl is 0.999 no; because the Pl is 1.008 no because the
Pl is 0,992

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