Basic Capital Budgeting Techniques Answer each independent question, (a) through (e).a. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for 5 years.What is the payback period (in years, rounded to 2 decimal places) for this investment under theassumption that the cash inflows occur evenly throughout the year?b. Project B costs $5,000 and will generate after-tax cash inflows of $500 in year 1, $1,200 in year2, $2,000 in year 3, $2,500 in year 4, and $2,000 in year 5. What is the payback period (in years,rounded to 2 decimal places) for this investment assuming that the cash inflows occur evenlythroughout the year?c. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5years. The firm uses straight-line depreciation with no salvage value and is subject to a 25% taxrate. What is the payback period (in years, and rounded to 2 decimal places) under the assumptionthat all cash inflows occur evenly throughout the year? d. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. The cash expenditures will be $1,500 per year. The firm uses straight-line depreciation with an estimated salvagevalue of $500 and has a tax rate of 25%.(1) What is the accounting (book) rate of return based on the original investment, rounded to 2 decimal places? (2) What is the book rate of return based on the average book value, rounded to 2 decimal places?e. What is the NPV for each of the projects (A) through (D)? Assume that the firm requires a minimum after-tax return of 8% on all investments. Use the built-in NPV function for all calculations;round all answers to nearest whole dollar.
Basic Capital Budgeting Techniques Answer each independent question, (a) through (e).
a. Project A costs $5,000 and will generate annual after-tax net
What is the payback period (in years, rounded to 2 decimal places) for this investment under the
assumption that the cash inflows occur evenly throughout the year?
b. Project B costs $5,000 and will generate after-tax cash inflows of $500 in year 1, $1,200 in year
2, $2,000 in year 3, $2,500 in year 4, and $2,000 in year 5. What is the payback period (in years,
rounded to 2 decimal places) for this investment assuming that the cash inflows occur evenly
throughout the year?
c. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5
years. The firm uses straight-line
rate. What is the payback period (in years, and rounded to 2 decimal places) under the assumption
that all cash inflows occur evenly throughout the year?
d. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. The cash expenditures will be $1,500 per year. The firm uses straight-line depreciation with an estimated salvage
value of $500 and has a tax rate of 25%.
(1) What is the accounting (book)
(2) What is the book rate of return based on the average book value, rounded to 2 decimal places?
e. What is the
round all answers to nearest whole dollar.
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