Consider the Following 10-year project: Year Cash Flow 0 -30000 1 2500 2 5000 3 6750 4 7000 5 7250 6 6000 7 6250 8 8000 9 3750 10 2000 What is the Discounted Payback Period for the project at 12% required rate of return? Would you accept this project if the cut-off is 9 years?

Consider the Following 10-year project: Year Cash Flow 0 -30000 1 2500 2 5000 3 6750 4 7000 5 7250 6 6000 7 6250 8 8000 9 3750 10 2000 What is the Discounted Payback Period for the project at 12% required rate of return? Would you accept this project if the cut-off is 9 years?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 13PROB

See similar textbooks

Related questions

Q: the internal rate of return for this investment opportunity is closest to?

A: To calculate the internal rate of return (IRR) for the investment opportunity, we need to find the…

Q: uity company decides to recapitalize. The company has an unlevered beta of 1.1, the market risk…

A: The required rate of return depends on the risk of the firm and risk of the firm depends on the…

Q: Exercise 26-9 (Static) Payback period; net present value; unequal cash flows LO P1, P3 Gonzalez…

A: Capital budgeting refers to the process of evaluating and selecting long-term investment projects or…

Q: The annual effective interest rate is 6%. Determine X.

A: To determine the value of X, we need to calculate the future value of the monthly deposits made by…

Q: The following information is given about an Option on a stock: S(0)=$31, X-$34, rf-9%, variance…

A: Please note that under the answering guidelines only up to 3 subparts can be answered. Kindly repost…

Q: An investor has $1000 initial wealth for investment and he borrows another $1000 at the risk free…

A: The beta is said to be the measure of systematic risk of the investment and and it is used to…

Q: The calculation of an investor's Risk Aversion (A) requires us to look at that individual investor's…

A: A key idea in finance and investment theory, risk aversion examines how investors behave and what…

Q: The NPV of renting the machine is $. (Round to the nearest dollar. Enter a negative NPV as a…

A: In this question, the NPV is the PV of all costs incurring over the life of the asset. Therefore, we…

Q: A delivery company is looking at converting their fleet of gasoline vans to electric vehiclesThe all…

A: Net present value is the modern method of capital budgeting that is used to determine the present…

Q: Variable Target inflation rate Current inflation rate Value 2 percent 9 percent 2 percent 2 percent…

A: Taylor's rule provides the formula to determine the Federal Funds Target Rate as shown below.…

Q: The monthly payment is $ The remaining balance is

A: To find the monthly payment and estimate the remaining balance, we can use the formula for the…

Q: Bramble Corporation had net credit sales of $14100000 and cost of goods sold of $9370000 for the…

A: Inventory turn over ratio show how much time inventory has been rolled over during the year and it…

Q: Rachel Johnson has net monthly income of $3,325. She has a monthly auto loan payment of $385, a…

A: Debt-payments-to-income-ratio refers to the measurement of the ability of the company for repaying…

Q: Problem (6): You work for the 3T company, which expects to earn at least 18 percent on its…

A: The variation between the current value of cash inflows and withdrawals over a period of time is…

Q: Two years ago on August 31st, Wojtek purchased a strip bond with a bond equivalent yield of…

A: Capital gain is calculated as shown below. Capital gain=Selling price-Purchase price

Q: following a. The IRR is the discount rate that equates the present value of a project's expected…

A: IRR internal rate of return is minimum break even rate at which cost of capital equal to rate of…

Q: From the following facts, complete a depreciation schedule by using the straight-line method: Note:…

A: The depreciation of an asset refers to the reduction in the book value of the asset throughout its…

Q: Pls answer very fast.I ll upvote correct answer . Thank You An investor purchased a fixed-coupon…

A: A bond represents a debt instrument issued to raise debt capital and expand the business operations…

Q: Internal rate of return Product A 26.4 Product B 24,8

A: IRR is the internal rate of return that makes the sum of the present values of future cash flows to…

Q: Lucky Larry wins $6,000,000 in a state lottery. The standard way in which the state pays such…

A: Payment = p = $240,000 Time = t = 25 years Interest rate = r = 5%

Q: (Related to Checkpoint 5.6) (Solving for) At what annual interest rate, compounded annually, would…

A: Future Value is that value which includes the interest earned and initial invested amount. It is…

Q: Theoretical foundation of risk management in the banking sector from a customer's perspective

A: A customer's perspective regarding risk management in the banks primarily focused on the safety and…

Q: What is the value now of an annuity that pays $2,000 at the end of each of the next 50 years…

A: Value of annuity is that amount which is invested by the investor and against which investor will…

Q: which the property is expected to be sold

A: To calculate the internal rate of return (IRR) of the investment opportunity, we need to calculate…

Q: Bramble Corporation had net credit sales of $14100000 and cost of goods sold of $9370000 for the…

A: Here, Net Credit Sales is $14100000 Cost of Goods Sold is $9370000 Average Inventory is $1171250

Q: The management of LTTP Corp. is preparing for issuing equity to fund a new project. Rights offer is…

A: Subscription price refers to the price at which the shareholders who are already in existence can be…

Q: Wilma borrows $10,000 from "Jaw Breaker Joe" and promises to repay Joe a total of $10,500 in one…

A: Present Value = pv = $10,000 Future value = fv = $10,500 Time = t = 1 / 12

Q: A $1500 treasury bond with a current yield of 5.45 that is quoted at 116.6 points. What is the…

A: Treasury Bond = $1500 Current Yield = 5.45% Quoted Point = 116.6

Q: Year 2004 2005 2006 2007 2008 C. d. Stock A's Returns, ra (18.00%) 33.00 15.00 (0.50) 27.00 Stock…

A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…

Q: 7. Complete the last four columns of the table below using an effective tax rate of 40% for an asset…

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

Q: Calculate the value of a bond that matures in 10 years and has a $1,000 par value. The annual coupon…

A: time = t = 10 Years Face value = fv = $1000 Coupon rate = 9% Yield to Maturity = r = 15%

Q: Q5. A physics lab is considering leasing a diagnostic scanner that costs $5,800,000, and it would be…

A: Annuity is a series of equal payments at equal interval for a specified period of time. With…

Q: XYZ Co is considering to purchase equipment that has 4 years of life and requires an initial capital…

A: Npv is a capital budgeting techniques. Which help in decision making on the basis of future cash…

Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…

A: Value of fixed Assets = fa = $2.35 million Life = l = 3 years Annual Sales = s = $1,669,000 Cost = c…

Q: Cash Flow (£) -24,000,000 8,000,000 13,000,000 10,000,000 Year 0 1 2 3 It is planning to issue £12…

A: Unlevered ROR is rate of return of unlevered firm in which financing is done only b equity, no debt…

Q: At the start of the year, Piotr has an investment fund worth $30,000.00. 4 months later the fund is…

A: The DWR and the TWR refer to the return that the investment provides based on the money invested and…

Q: You find the following corporate bond quotes. Assume that it is currently January 15, 2022. The…

A: Bond refers to the financial instrument that are issued by the government in against of providing…

Q: Draw the position diagram for the straddle.

A: Straddle is an option strategy you use when you expect a high change in price of the stock but not…

Q: You make annual deposits into a retirement account that earns 4% compound annual interest. The first…

A: Initial deposit = $5000 Interest rate = 4% Growth rate of deposits = 10%

Q: 3.70 percent coupon municipal bond has 15 years left to maturity and has a price quote of 95.65. The…

A: Yield to maturity is rate of return realized when bond is held till maturity of bond and all…

Q: You expect to receive $8,000 at the end of each year for the next ten years, followed by a single…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: For this assignment, discuss how the finance function is interrelated and connected to the other…

A: A company's finance department is in charge of overseeing the organization's finances and making…

Q: Investor John enters into a seven-month forward contract on a dividend-paying stock when the stock…

A: The term "arbitrage" refers to the practice of profiting risk-free from pricing differences across…

Q: An analyst has gathered the following information about ABC Inc. and DEF Inc. The respective credit…

A: Credit spread is the difference in the market rates of two bonds with same maturity but different…

Q: 16. What is the total variance of the following portfolio including 2 assets invested in the ratio…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: Amir has obtained a $250,000 mortgage. The mortgage is amortized over 25 years and the term of the…

A: Mortgage refers to the long-term loan that is taken by the individual to purchase residential…

Q: Which of the following statements about the impact of a company's competitive efforts in a region on…

A: The regional market share of a company refers to the portion of the industry revenue that the…

Q: What is the price of a European call option on a non-dividend-paying stock when the stock price is…

A: Here, Particulars Values Share Price $ 52.00 Exercise Price $ 50.00 Risk-free rate…

Q: In early 2013, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company,…

A: Introduction: Return on assets measures the profitability of a firm in relation to its total…

Question

Consider the Following 10-year project:
Year	Cash Flow
0	-30000
1	2500
2	5000
3	6750
4	7000
5	7250
6	6000
7	6250
8	8000
9	3750
10	2000

What is the Discounted Payback Period for the project at 12% required rate of return? Would you accept this project if the cut-off is 9 years?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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: Given value

VIEW

Step 2: calculation

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 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?
How much must be invested now to receive $30,000 for 10 years if the first $30.000 is received one year from now and the rate is 8%?
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?
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?
In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years): The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital. (1) What is each projects initial NPV without replication? (2) What is each projects equivalent annual annuity? (3) Apply the replacement chain approach to determine the projects extended NPVs. Which project should be chosen? (4) Assume that the cost to replicate Project T in 2 years will increase to 105,000 due to inflation. How should the analysis be handled now, and which project should be chosen?