Page 305 question 1. calculating payback[lo2] what is the payback

Page 305

Question 1. Calculating Payback[LO2] What is the payback period for the following set of cash flows?

Year

Cash Flow

0

−$7,600

1

 1,900

2

 2,900

3

 2,300

4

 1,700

Question 3. Calculating Payback[LO2] Siva, Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?.

Year

Cash Flow (A)

Cash Flow (B)

0

−$45,000

−$ 55,000

1

 16,000

 13,000

2

 21,000

 15,000

3

 15,000

 24,000

4

 9,000

 255,000

 

Question 4.  Calculating Discounted Payback[LO3] An investment project has annual cash inflows of $2,800, $3,700, $5,100, and $4,300, for the next four years, respectively. The discount rate is 14 percent. What is the discounted payback period for these cash flows if the initial cost is $5,200? What if the initial cost is $5,400? What if it is $10,400

 

Page 306

Question6. Calculating AAR[LO4] You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $15 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,754,000, $1,820,500, $1,716,300, and $1,097,400 over these four years, what is the project’s average accounting return (AAR)?

Question 7.  Calculating IRR[LO5] A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project?

Year

Cash Flow

0

−$26,000

1

 11,000

2

 14,000

3

 10,000

Question 8. Calculating NPV[LO1] For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent?

Page 307

Question 15. Calculating Profitability Index[LO7] What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent?

Year

Cash Flow

0

−$15,300

1

 9,400

2

 7,600

3

 4,300

Question 16.Problems with Profitability Index[LO1,7] The Sloan Corporation is trying to choose between the following two mutually exclusive design projects:

Year

Cash Flow (I)

Cash Flow (II)

0

−$51,000

−$14,400

1

 24,800

 7,800

2

 24,800

 7,800

3

 24,800

 7,800

1.  If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?

2.  If the company applies the NPV decision rule, which project should it take?

3.  Explain why your answers in (a) and (b) are different.

 

Page 308

Question 17.   Comparing Investment Criteria[LO1,2,3,5,7] Consider the following two mutually exclusive projects:

Year

Cash Flow (A)

Cash Flow (B)

0

−$455,000

−$65,000

1

 58,000

 31,000

2

 85,000

 28,000

3

 85,000

 25,000

4

 572,000

 19,000

Whichever project you choose, if any, you require a return of 11 percent on your investment.

1.  If you apply the payback criterion, which investment will you choose? Why?

2.  If you apply the discounted payback criterion, which investment will you choose? Why?

3.  If you apply the NPV criterion, which investment will you choose? Why?

4.  If you apply the IRR criterion, which investment will you choose? Why?

5.  If you apply the profitability index criterion, which investment will you choose? Why?

6.  Based on your answers in (a) through (e), which project will you finally choose? Why?

 

Question 19. MIRR[LO6] RAK Corp. is evaluating a project with the following cash flows:

Year

 Cash Flow

0

−$41,000

1

 15,700

2

 19,400

3

 24,300

4

 18,100

5

 −9,400

The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all three methods.

 

 

 

Get 20% Discount on This Paper
Pages (550 words)
Approximate price: -

Try it now!

Get 20% Discount on This Paper

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

Do My Homework has assembled a team of highly skilled writers with diverse experience in the online writing circles. Our aim is to become a one stop shop for all your Academic/ online writing. Check out below our amazing service!

Essays

Essay Writing Services

At Do My Homework, we prioritize on all aspects that creates a good grade such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines. The principal purpose of essay writing is to present the author's evaluation concerning a singular subject about which they have made. Since Professionalism is the mother of every success, try our team of experienced writers in helping you complete your essays and other assignments.

Admissions

Admission Papers

You have been trying to join that prestigious institution you long yearned for, but the hurdle of an admission essay has become a stumbling block. We have your back, with our proven team that has gained invaluable experience over time, your chance of joining that institution is now! Just let us work on that essay.How do you write an admission essay? How do you begin the essay? For answers, try Quality Custom Writers Now!

Editing

Editing and Proofreading

Regardless of whether you're pleased with your composing abilities, it's never an impractical notion to have a second eye go through your work. The best editing services leaves no mistake untouched. We recognize the stuff needed to polish up a writing; as a component of our editing and proofreading, we'll change and refine your write up to guarantee it's amazing, and blunder free. Our group of expert editors will examine your work, giving an impeccable touch of English while ensuring your punctuation and sentence structures are top-notch.

Coursework

Technical papers

We pride ourselves in having a team of clinical writers. The stringent and rigorous vetting process ensures that only the best persons for job. We hire qualified PhD and MA writers only. We equally offer our team of writers bonuses and incentives to motivate their working spirit in terms of delivering original, unique, and informative content. They are our resources drawn from diverse fields. Therefore your technical paper is in the right hands. Every paper is assessed and only the writers with the technical know-how in that field get to work on it.

Coursework

College Essay Writing

If all along you have been looking for a trustworthy college essay service provider that provides superb academic papers at reasonable prices, then be glad that you search has ended with us. We are your best choice! Get high-quality college essay writing from our magnificent team of knowledgeable and dedicated writers right now!

Coursework

Quality Assignment/Homework Help

We give the students premium quality assignments, without alarming them with plagiarism and referencing issues. We ensure that the assignments stick to the rules given by the tutors. We are specific about the deadlines you give us. We assure you that you will get your papers well in advance, knowing that you will review and return it if there are any changes, which should be incorporated.