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Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.       Time 0 1 2 3 4 5 6 Cash Flow $(10,000) $2,400 $4,800 $3,200 $3,200 $2,800 $2,400   Questions Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows. Payback period Internal Rate of Return (IRR) Simple Rate of Return

Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.       Time 0 1 2 3 4 5 6 Cash Flow $(10,000) $2,400 $4,800 $3,200 $3,200 $2,800 $2,400   Questions Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows. Payback period Internal Rate of Return (IRR) Simple Rate of Return

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 7PROB
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Assignment: Capital Budgeting Decisions

Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.  

 

 

Time

0

1

2

3

4

5

6

Cash Flow

$(10,000)

$2,400

$4,800

$3,200

$3,200

$2,800

$2,400

 

Questions

Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows.

Payback period

Internal Rate of Return (IRR)

Simple Rate of Return

Net Present Value

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