Kara, Incorporated, imposes a payback cutoff of three years for its internationalinvestment projects.Cash Flow (A)-$ 40,00014,00018,00017,00011,000Cash Flow (B)-$ 55,00011,00013,00016,000255,000YearWhat is the payback period for both projects? (Do not round intermediate calculationsand round your answers to 2 decimal places, e.g., 32.16.)Project AProject ByearsyearsWhich project should the company accept?O Project AO Project BO1234

Statement of accumulated cash flow Year Cash flow Accumulated cash flow A B C=Last year C+B 0…

Answered: Kara, Incorporated, imposes a payback…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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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.
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Kara, Incorporated, imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available. Year Cash Flow (A) Cash Flow (B) 0 −$ 56,000 −$ 101,000 1 22,500 24,500 2 29,600 29,500 3 24,500 29,500 4 10,500 239,000 What is the payback period for each project? Which, if either, of the projects should the company accept?
Bronco, Inc., imposes a payback cutoff of three years for its international investment projects.    Year Cash Flow (A) Cash Flow (B) 0 –$ 52,000 –$ 62,000 1 19,000 11,000 2 20,000 14,000 3 17,000 18,000 4 4,000 222,000 What is the payback period for both projects? Which project should the company accept?
Stenson, Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available. Year Cash Flow A Cash Flow B 0 –$ 49,000 –$ 94,000      1 19,000      21,000      2 25,400      26,000      3 21,000      33,000      4 7,000      246,000      What is the payback period for each project? Project A: _____ years Project B: _____ years
Novell, Inc., has the following mutually exclusive projects.    Year Project A Project B   0 –$21,000    –$24,000      1 12,500    13,500      2 9,000    10,000      3 3,000    9,000       a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) a-2. If the company's payback period is two years, which, if either, of these projects should be chosen? multiple choice 1 Project A Project B Both projects Neither project    b-1. What is the NPV for each project if the appropriate discount rate is 17 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Janina, Incorporated, has the following mutually exclusive projects. Year Project A Project B 0 −$ 30,000 −$ 33,000 1 17,000 18,000 2 13,500 12,000 3 3,900 13,500 a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) a-2. If the company's payback period is two years, which, if either, of these projects should be chosen? multiple choice 1 Project A Project B Both projects Neither project b-1. What is the NPV for each project if the appropriate discount rate is 15 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Quattro, Inc. has the following mutually exclusive projects available. The company has historically used a four-year cutoff for projects. The required return is 11 percent. The payback for Project A is ____ while the payback for Project B is ____. The NPV for Project A is _____ while the NPV for Project B is ____. Which project, if any, should the company accept? Year Cash Flow (A) Cash Flow (B) 0 -$50,000 -$60,000 1 6,000 7,000 2 9,000 12,000 3 20,000 22,000 4 25,000 20,000 Can the calculator and excel file be provided?
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate for both projects is 9 percent. Year AZMMini-SUV AZFFull-SUV 0 –$ 535,000 –$ 885,000 1 337,000 367,000 2 214,000 454,000 3 167,000 307,000 a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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