Consider an investment that costs 100,000 and has a cash inflow of 30,000 every year for 5 years. The required return is 10% and the required payback is 4 years. What is the discounted payback period? What is the profitability index?

Consider an investment that costs 100,000 and has a cash inflow of 30,000 every year for 5 years. The required return is 10% and the required payback is 4 years. What is the discounted payback period? What is the profitability index?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 10PB: Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Consider an investment that costs 100,000 and has a
cash inflow of 30,000 every year for 5 years. The
required return is 10% and the required payback is 4
years. What is the discounted payback period? What
is the profitability index?

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

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