Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 1E
Payback Method
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the
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Payback Method
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash inflow in the last year were several times as large?
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
Year
Investment
Cash Inflow
1
$
61,000
$
3,000
2
$
5,000
$
6,000
3
$
12,000
4
$
13,000
5
$
16,000
6
$
10,000
7
$
8,000
8
$
10,000
9
$
9,000
10
$
9,000
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash inflow in the last year were several times as large?
REQUIRED 1
Determine the payback period of the investment. (Round your answer to 1 decimal place.)
Payback period
______
years
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
Year
Investment
Cash Inflow
1
$
58,000
$
4,000
2
$
8,000
$
8,000
3
$
11,000
4
$
14,000
5
$
17,000
6
$
15,000
7
$
13,000
8
$
11,000
9
$
10,000
10
$
10,000
Required:
1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash inflow in the last year were several times as large?
Chapter 12 Solutions
Introduction To Managerial Accounting
Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3ECh. 12.A - Prob. 4ECh. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6ECh. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - Prob. 4Q
Ch. 12 - Why are discounted cash flow methods of making...Ch. 12 - Prob. 6QCh. 12 - Identify two simplifying assumptions associated...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10QCh. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - How is the project profitability index computed,...Ch. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1AECh. 12 - The Excel worksheet form that appears below is to...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 3F15Ch. 12 - Prob. 4F15Ch. 12 - Prob. 5F15Ch. 12 - Prob. 6F15Ch. 12 - Prob. 7F15Ch. 12 - Prob. 8F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 11F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 13F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Payback Method The management of Unter...Ch. 12 - Net Present Value Analysis The management of...Ch. 12 - Internal Rate of Return Wendell’s Donut Shoppe is...Ch. 12 - Uncertain Future Cash Flows Lukow Products is...Ch. 12 - Prob. 5ECh. 12 - Simple Rate of Return Method The management of...Ch. 12 - Prob. 7ECh. 12 - Payback Period and Simple Rate of Return Nicks...Ch. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Preference Ranking of Investment Projects Oxford...Ch. 12 - Prob. 12ECh. 12 - Payback Period and Simple Rate of Return...Ch. 12 - Comparison of Projects Using Net Present Value...Ch. 12 - Internal Rate of Return and Net Present Value...Ch. 12 - Net Present Value Analysis Windhoek Mines, Ltd.,...Ch. 12 - Net Present Value Analysis; Internal Rate of...Ch. 12 - Net Present Value Analysis Oakmont Company has an...Ch. 12 - Simple Rate of Return; Payback Period Paul Swanson...Ch. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Comprehensive Problem - Lou Barlow, a divisional...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Net Present Value Analysis In five years, Kent...Ch. 12 - Prob. 28PCh. 12 - Prob. 29P
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- The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment: A. What is the payback period of this uneven cash flow? B. Does your answer change if year 10s cash inflow changes to $500,000?arrow_forwardAssume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?arrow_forwardAssume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method?arrow_forward
- Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. Determine the internal rate of return for each project by (A) computing a present value factor for an annuity of 1 and (B) using the present value of an annuity of 1 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?arrow_forwardThe management of Unter Corporation, an architectural design firm, is considering an investment with thefollowing cash flows:Year Investment Cash Inflow1 ......................... $15,000 $1,0002 ......................... $8,000 $2,0003 ......................... $2,5004 ......................... $4,0005 ......................... $5,0006 ......................... $6,0007 ......................... $5,0008 ......................... $4,0009 ......................... $3,00010 ......................... $2,000Required:1. Determine the payback period of the investment.2. Would the payback period be affected if the cash inflow in the last year were several timesas large?arrow_forward
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