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EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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Textbook Question
Chapter 10, Problem 3MC
What is the payback period on each project? If Caledonia imposes a 3-year maximum acceptable payback period, which of these projects should be accepted?
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Students have asked these similar questions
Answer the following:
1 What is the payback period on each of the above projects?
2 Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept? Why?
3 If you use a cutoff period of three years, which projects would you accept? Why?
Calculate for each project:
The payback period for each project
The Net Present Value (NPV)
The Profitability index
Which project should be accepted and why?
PLEASE SEE ATTACHED PHOTO TO ANSWER THE ABOVE QUESTIONS
Your firm uses the IRR method and asks you to evaluate the following mutually exclusive projects:
Using the appropriate IRR method, evaluate these proposals assuming a required rate of return of 10 per cent. Compare your answer with the net present value method.
Chapter 10 Solutions
EBK FOUNDATIONS OF FINANCE
Ch. 10 - Why is capital budgeting such an important...Ch. 10 - What are the disadvantages of using the payback...Ch. 10 - Prob. 4RQCh. 10 - What are mutually exclusive projects? Why might...Ch. 10 - Prob. 6RQCh. 10 - When might two mutually exclusive projects having...Ch. 10 - Prob. 1SPCh. 10 - Prob. 2SPCh. 10 - Prob. 3SPCh. 10 - Prob. 4SP
Ch. 10 - (NPV, PI, and IRR calculations) Fijisawa Inc. is...Ch. 10 - (Payback period, NPV, PI, and IRR calculations)...Ch. 10 - (NPV, PI, and IRR calculations) You are...Ch. 10 - (Payback period calculations) You are considering...Ch. 10 - (NPV with varying required rates of return)...Ch. 10 - Prob. 10SPCh. 10 - (NPV with varying required rates of return) Big...Ch. 10 - (NPV with different required rates of return)...Ch. 10 - (IRR with uneven cash flows) The Tiffin Barker...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (MIRR calculation) Calculate the MIRR given the...Ch. 10 - (PI calculation) Calculate the PI given the...Ch. 10 - (Discounted payback period) Gios Restaurants is...Ch. 10 - (Discounted payback period) You are considering a...Ch. 10 - (Discounted payback period) Assuming an...Ch. 10 - (IRR) Jella Cosmetics is considering a project...Ch. 10 - (IRR) Your investment advisor has offered you an...Ch. 10 - (IRR, payback, and calculating a missing cash...Ch. 10 - (Discounted payback period) Sheinhardt Wig Company...Ch. 10 - (IRR of uneven cash-flow stream) Microwave Oven...Ch. 10 - (MIRR) Dunder Mifflin Paper Company is considering...Ch. 10 - (MIRR calculation) Arties Wrestling Stuff is...Ch. 10 - (Capital rationing) The Cowboy Hat Company of...Ch. 10 - Prob. 29SPCh. 10 - (Size-disparity problem) The D. Dorner Farms...Ch. 10 - (Replacement chains) Destination Hotels currently...Ch. 10 - Prob. 32SPCh. 10 - Prob. 33SPCh. 10 - Why is the capital-budgeting process so important?Ch. 10 - Prob. 2MCCh. 10 - What is the payback period on each project? If...Ch. 10 - What are the criticisms of the payback period?Ch. 10 - Prob. 5MCCh. 10 - Prob. 6MCCh. 10 - Prob. 7MCCh. 10 - Prob. 8MCCh. 10 - Prob. 9MCCh. 10 - Determine the IRR for each project. Should either...Ch. 10 - How does a change in the required rate of return...Ch. 10 - Caledonia is considering two investments with...
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- b. Given that you wish to use the payback rule with a cutoff period of 2 years, which projects would you accept? c. If you use a cutoff period of 3 years with the discounted payback rule, which projects would you accept?arrow_forwardBased on the picture, Calculate: a) The payback period for the project b) The discounted payback period for the project c) The net present value for the project Please help me ASAP. Thank you. I'm tryna do my revision. ?arrow_forwardUnder what conditions might you find more thanone IRR for a project? How would you decidewhether or not to accept the project? If you werecomparing two mutually exclusive projects, onewith a single IRR of 12% and the other with two different IRRs of 10% and 15%, how should youchoose between the projects?arrow_forward
- Using image: a-1. What is the payback period for each project a-2. If you apply the payback criterion, which investment will you choose? b-1. What is the discounted payback period for each project? b-2. If you apply the discounted payback criterion, which investment will you choose? c-1. What is the NPV for each project? c-2. If you apply the NPV criterion, which investment will you choose? d-1. What is the IRR for each project? d-2. If you apply the IRR criterion, which investment will you choose? e-1. What is the profitability index for each project? e-2. If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose?arrow_forwardPlease help me with this question (picture below) 1. Calculate the payback period, accounting rate of return, net present value of each project. Based on your calculations, discuss whether the projects should go ahead. Assume that the target value for payback is 3 years for project A and 2 years for project B.2. List advantages and disadvantages of payback period, accounting rate of return, net present value of each project.arrow_forwardWhat is the estimated Internal Rate of Return (IRR) of the project?Should the project be accepted based on the IRR?arrow_forward
- Which of the following statements are correct in the context of Annual Worth Value Calculations? Note: This is a Multiple Answers question so please select all of the options you believe are correct. O If the period of need is greater or equal to the Least Common Multiple (LCM) of the lives of all of the alternatives, then we simply need to compare the Annual Worth (AW) of each alternative over one life cycle to determine the best project. O If each project alternative is allowed to complete its full life, we can assume that the AW for the full life cycle will be exactly the same for each additional full life cycle. O You must use an incremental project justification approach when comparing two or more Mutually Exclusive Projects when using Annual Worth (AW) project values. E The output of an Annual Worth Value Calculation is easy to understand and communicate because it is stated in terms of dollars per vear. The decision criteria used to evaluate a single project using the AW method…arrow_forwardCalculate internal Rate of Return of the project. Should the project be accepted? If reinvestment rate assumption of IRR is changed to cost of capital 11% , what should the modified rate of return ( MIRR)?arrow_forwardConsider the following two mutually exclusive investment projects: Assume that MARR = 15%. Which project would be selected under an infiniteplanning horizon with project repeatability likely, according to the IRR criterion?arrow_forward
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