EBK FUNDAMENTALS OF CORPORATE FINANCE A
10th Edition
ISBN: 9780100342613
Author: Ross
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 9CRCT
Payback and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Net Present Value Suppose a project has conventional cash flows and a positive NPV. What do you know about its payback? Its discounted payback? Its profitability index? Its IRR? Explain.
Net Present Value You are evaluating two projects, Project A and Project B . Project A has a short period of future cash flows, while Project B has relatively long future cash flows. Which project will be more sensitive to changes in the required return? Why?
A project is economically feasible if:
O a Its future worth is less than zero
O b. Its annual worth is greater than 0
O .ts internal rate of return is equal to its external rate of return
O d. Its external rate of return is less than the minimum attractive rate of return
O e. Its external rate of return is greater than 0
Chapter 9 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE A
Ch. 9.1 - Prob. 9.1ACQCh. 9.1 - Prob. 9.1BCQCh. 9.2 - Prob. 9.2ACQCh. 9.2 - Why do we say that the payback period is, in a...Ch. 9.3 - Prob. 9.3ACQCh. 9.3 - What advantage(s) does the discounted payback have...Ch. 9.4 - What is an average accounting rate of return...Ch. 9.4 - What are the weaknesses of the AAR rule?Ch. 9.5 - Prob. 9.5ACQCh. 9.5 - Is it generally true that an advantage of the IRR...
Ch. 9.6 - What does the profitability index measure?Ch. 9.6 - How would you state the profitability index rule?Ch. 9.7 - Prob. 9.7ACQCh. 9.7 - If NPV is conceptually the best procedure for...Ch. 9 - Prob. 9.1CTFCh. 9 - Prob. 9.2CTFCh. 9 - Prob. 9.3CTFCh. 9 - Prob. 9.4CTFCh. 9 - Prob. 9.5CTFCh. 9 - What is a benefitcost ratio?Ch. 9 - Prob. 9.7CTFCh. 9 - Prob. 1CRCTCh. 9 - Net Present Value [LO1] Suppose a project has...Ch. 9 - Prob. 3CRCTCh. 9 - Prob. 4CRCTCh. 9 - Prob. 5CRCTCh. 9 - Net Present Value [LO1] Concerning NPV: a....Ch. 9 - Prob. 7CRCTCh. 9 - Profitability Index [LO7] Concerning the...Ch. 9 - Payback and Internal Rate of Return [LO2, 5] A...Ch. 9 - Prob. 10CRCTCh. 9 - Capital Budgeting Problems [LO1] What difficulties...Ch. 9 - Prob. 12CRCTCh. 9 - Modified Internal Rate of Return [LO6] One of the...Ch. 9 - Net Present Value [LO1] It is sometimes stated...Ch. 9 - Internal Rate of Return [LO5] It is sometimes...Ch. 9 - Prob. 1QPCh. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 16QPCh. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 19QPCh. 9 - Prob. 20QPCh. 9 - Prob. 21QPCh. 9 - Cash Flow Intuition [LO1, 2] A project has an...Ch. 9 - Prob. 23QPCh. 9 - Prob. 24QPCh. 9 - Prob. 25QPCh. 9 - Prob. 26QPCh. 9 - Problems with IRR [LO5] McKeekin Corp. has a...Ch. 9 - Prob. 28QPCh. 9 - Prob. 1MCh. 9 - Prob. 2MCh. 9 - Prob. 3M
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV: WACC B.IRR: The IRR itself NPV: WACC C.The cash flows generated by the project are not assumed to be reinvested. So they will not earn a rate of return. D.IRR: Risk free rate NPV: Risk free Rate E. IRR:WACC NPV: WACCarrow_forward1. What is the project’s payback period? 2.arrow_forward18. In a situation such as Acron's, where a one-time cost is followed by a sequence of cash flows, the internal rate of return (IRR) is the discount rate that makes the NPV equal to 0. The idea is that if the discount rate is greater than the IRR, the company will not pursue the project, but if the discount rate is less than the IRR, the project is financially attractive. a. Use Excel's Goal Seek tool to find the IRR for the Acron model. b. Excel also has an IRR function. Look it up in online help to see how it works, and then use it on Acron's model. Of course, you should get the same IRR as in part a. c. Verify that the NPV is negative when the discount rate is slightly greater than the IRR, and that it is positive when the discount rate is slightly less thanarrow_forward
- All parts are under one question therefore per your policy all can be answered. 7. The NPV and payback period What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $375,000 Year 2 $425,000 Year 3 $500,000 Year 4 $400,000 A. If the project’s weighted average cost of capital (WACC) is 9%, the project’s NPV (rounded to the nearest dollar) is: $353,334 $305,152 $273,031 $321,213 B. Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Check all that apply. The payback period does not…arrow_forward2.When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)? A. so that you can see which project has the greatest net present value (NPV) B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter timeframe C. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered D. so that the projects can be compared on their cost or value created per yeararrow_forward1. What is the project’s net present value? 2. What is the project’s internal rate of return to the nearest whole percent? 3. What is the project’s simple rate of return?arrow_forward
- which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of moneyarrow_forwardProblem 1. What is the estimated rate of return for n this projectarrow_forward9. Which of the following statements concerning the payback period, is not true? The payback period is simple to calculate and understand. The payback period measures the time that a project will take to generate enough cash flows to cover the initial investment. The payback period ignores cash flows after the payback point has been reached. It takes account of the time value of money.arrow_forward
- Q1) How much is the Profitability Index? Q2) What is the Discounted Payback period of the project? Q3) What is the NPV of the Project?arrow_forwardIf a project has a positive net present value, then which of the following statements are correct? I. The present value of all cash inflows must equal the costs of the project. The IRR is equal to the required rate of return. II. A increase in the project's initial cost will cause the project to have a higher positive NPV. III. Any delay in receiving the projected cash inflows will cause the project to have a higher positive NPV. IV. IRR must equal zero. Only II Only III All None of themarrow_forward[EXCEL] Payback: Refer to Problem 5. What are the payback periods for production systems 1 and 2? If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? please use excel. Problem 5 info: 5. [EXCEL] Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest? Year System 1 System 2 0 −$15,000 −$45,000 1 15,000 32,000 2 15,000 32,000 3 15,000 32,000arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License