Adequate information: Year Project B Project D 0 -$850 -$1,700 1 $670 $1,300 2 $510 $750 3 $90 $350 Discount rate = 10% To determine: The project that should be chosen based on the payback period. Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

Question

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Answer 1

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Answer 2

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

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Answer 3

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 6

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

Answer 7

Chapter 5, Problem 14QAP

a.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the payback period.

Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net cash inflows that it generates.

Answer 8

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 9

b.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the NPV.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 10

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 11

c.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project should be chosen based on the IRR.

Introduction: IRR is the rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 12

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 13

d.

Summary Introduction

Adequate information:

Year Project B Project D
0 -$850 -$1,700
1 $670 $1,300
2 $510 $750
3 $90 $350

Discount rate = 10%

To determine: The project that should be chosen based on the Incremental IRR.

Introduction: Incremental IRR tells how much extra a company earns from a project when it invests in a larger project.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQ Ch. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQ Ch. 5 - Prob. 8CQ Ch. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...

Solution Summary: The author calculates the payback period of a project based on the initial investment recovered from the net cash inflows.

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Chapter 5 Solutions

Year	Project B	Project D
0	-$850	-$1,700
1	$670	$1,300
2	$510	$750
3	$90	$350