Answered: A company is considering a project that…

A company is considering a project that has the following cash flows with a WACC of 10.00%. What is the project's discounted payback? Year 1 2 3 Cash flows -$650 $500 $500 $500

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 4CMA

See similar textbooks

Related questions

Q: A production company is considering the following plans for production improvement: A. B C. Initial…

A: Interest Rate = 6% Project A Initial Cost = 10,000 Equivalent Uniform Annual Benefit = 1,625 N =…

Q: AG company would like to spend RM 700,000 on buying equipment. The cash inflows as in the Table.…

A: The payback period refers to the period within which the initial investment is recovered from the…

Q: Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the…

A: Discounted Payback Period = Years before full recovery + (unrecovered cost at the start of the year/…

Q: lustine Global Info Tech records the following cash flows at the end of each year for a project. If…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want a…

Q: A company is considering two projects. Project A Project B Initial investment $200,000 $200,000 Cash…

A: The Payback Period is one of the traditional techniques of capital budgeting that does not take into…

Q: A project is expected to provide the cash flows indicated below. Would you invest GH¢100000 in this…

A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…

Q: Fernando Designs is considering a project that has the following cash flow and WACC data. What is…

A: Discounted cashflow = years before discounted payback period occurs + (cumulative cashflow in the…

Q: 7. A company that makes clutch disks had the cash flows shown below for one department with a MARR…

A: Internal rate of return is the rate at which net present value of cash flows is 0. Modified IRR is…

Q: A company is considering two projects. Project I Project II Initial investment $200,000 $200,000…

A: The payback period can be calculated as the number of years it will take for a project to recover…

Q: Susmel Inc. is considering a project that has the following cash flow data. The project's regular…

A: Introduction: Payback period: Usually, payback period is expressed in years, which takes a capital…

Q: Grayson Corp. is considering the purchase of a piece of equipment that costs $34,269. Projected net…

A: Year Annual Cash inflows Cumulative Cash inflows 0 $(34,269) $(34,269) 1 6,702 (27567) 2…

Q: Justine Global Info Tech records the following cash flows at the end of each year for a project. If…

A: Present Value is the current value of all the cash flows which is to be received in the future which…

Q: A. Payback. The company requires all projects to payback within 3 years. Calculate the payback…

A: Payback period = Year of last negative cash flow + (Absolute value of last negative cash flow/Next…

Q: 13. Herbilux Botanicals forecasts the following cash flows at the end of each year for a project. If…

A: Solution:- Present value means the value in today’s terms. It is calculated by discounting the…

Q: A company is considering two projects. Project I Project II Initial investment $120,000 $120,000…

A: The payback period of a project with equal cash flows is calculated as ratio of initial investment…

Q: Consider a project with the following cash flows: Year Cash Flow - 10000 1 5000 5000 3 5000 4 5000…

A: Discount Rate = 15% Time Period = 4 Years

Q: Suppose we have a project with the following cash flows: Outgoing: P150,000 at t = 0, P250,000 at t…

A: IRR may be calculated using the following excel formula

Q: Stern Associates is çonsidering a project that has the following cash flow data. What is the…

A: Payback period: It is the time required by the project to cover its initial cost of investment. The…

Q: If the cost of a project is $50,000 and the cash inflows are as given in the table below, what is…

A: given cost of project =$50000

Q: 16. Masulis Inc. is considering a project that has the following cash flow and WACC data. What is…

A: The payback period is the time in which a business recovers the money that is initially invested in…

Q: Social Circle Publications Inc. is considering two new magazine products. The estimated net cash…

A: A. Payback period year Sound cellar cash flows cumulative cash flows PRO Gamer Cash flows…

Q: Calculate the profitability index of a 20-year project with a cost of $400,000 and an annual cash…

Q: A company is considering investment of k1,000,000 in a project. The following are the forecasts,…

A: Year Cash Inflows PVF @10 % Present Value 1 10000 0.9091 9091 2 40000 0.8265 40000 3 60000…

Q: 4. Capital expenditure of a new investment project is $ 120,000,000; the expected annualnet cash…

A: The question is based on the concept of capital budgeting and different discounted techniques of…

Q: Sorenson Stores is considering a project that has the following cash flows: Year Cash Flow 0…

A: Given information: Payback period is 2.5 years Cost of capital is 12%

Q: Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They are currently…

A: NPV and IRR are two methods of investment appraisal. NPV is the net present value of all cash…

Q: A company is considering the purchase of a new piece of equipment for P900,000. Predicted annual…

A: Cost of equipment = P 900000 Year Cash inflow 1 360000 2 300000 3 180000 4 150000 5…

Q: JB Manufacturing is considering a project with the following after-tax operating cash flows (in…

A: pay back period is a period at which the firm recovered its investment. formula: payback period =…

Q: Justine Global Info Tech records the following cash flows at the end of each year for a project. If…

A: Capital budgeting: It is a method of evaluating the projects which required huge investments and…

Q: 7. A company that makes clutch disks had the cash flows shown below for one department with a MARR…

A: Using excel MIRR function

Q: A company is considering a R250 000 investment with the following cash flows Year 1 : R30 000…

A: a) Working note:

Q: A company is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The…

A: The project cash flow in year 1 is calculated as revenues less costs after accounting for taxes

Q: Anderson International Limited is evaluating a project in Erewhon. The project will create the…

A: NPV can be calculated by following function in excel =NPV(rate,value1,[value2],…) + Initial…

Q: ald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected to…

A: Internal rate of return at which present value of cash flow is equal to the initial investment of…

Q: Justine Global Info Tech records the following cash flows at the end of each year a project. If the…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: BHT Company evaluates a project for a potential inclusion in its capital budget. In the first year…

A: The estimated incremental cash flow is calculated as cash flow from operations

Q: Your company, MCU Inc., is considering a new project whose data are shown below. What is the…

A: Cash flow means net cash and cash equivalent transferred in or out of the organization.

Q: Dusk Inc. is considering a project that has the following cash flow data. What is the project's…

A: Year 0 1 2 3 Cash flows −$1,150 $500 $500 $500

Question

A company is considering a project that has the following cash flows with a WACC of
10.00%. What is the project's discounted payback?
Year
1
2 3
Cash flows -$650 $500 $500 $500

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Brook Corporation’s free cash flow for the current year (FCF0) was $3.00 million. Its investors require a 13% rate of return on (WACC = 13%). What is the estimated value of operations if investors expect FCF to grow at a constant annual rate of (1) −5%, (2) 0%, (3) 5%, or (4) 10%?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000. $87,000, and $72,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel. see Appendix C.
Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?