An investment project has annual cash inflows of $8,200, $8,600,$8,800, and $7,600, and a discount rate of 7 percent.
What is the discounted payback period for these cash flows ifthe initial cost is $23,839?
An investment project has annual cash inflows of $8,200, $8,600,$8,800, and $7,600, and a discount rate of 7 percent.
What is the discounted payback period for these cash flows ifthe initial cost is $23,839?
Related questions
Payback Period, IRR, and Minimum Cash Flows
The management of Mesquite Limited is currently evaluating the following investment proposal:
| Time 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
|---|---|---|---|---|---|
| Initial investment | $260,000 | -- | -- | -- | -- |
| Net operating | |||||
| cash inflows | -- | $100,000 | $100,000 | $100,000 | $100,000 |
(a) Determine the proposal's payback period.
Answer
years
(b) Determine the proposal's internal rate of return. (Refer to Appendix 12B if you use the table approach.)
Answer
%
(c) Given the amount of the initial investment, determine the minimum annual net cash inflows required to obtain an internal rate of return of 16 percent. Round the answer to the nearest dollar.
$ Answer
CapitalBudgeting
Mason Co. is evaluating two alternative investment proposals.Below are data for each proposal:
Proposal A Proposal B
Initial Investment cost$84,000 $96,000
Extimated useful life 5 years 6 years
Estimated salvage value$4,000 -0-
Estimated annual netincome $8,200 $8,000
The following informationwas taken from present value tables
Present value
$1 due 5 years, discountedat 12% .567
$1 due 6 years, discounted at 12% .507
$1 received annually for 5years, discounted at 12% 3.605
$1 received annually for 6years, discounted at 12% 4.111
All revenue and expensesother than depreciation will be received and paid in cash. Thecompany uses a discount rate of 12% in evaluating all capitalinvestments.
Compute the following foreach proposal (round payback period to the nearest tenth of a yearand round return on average investment to the nearest tenth of apercent):
Proposal A | Proposal B | |
(a) Annual net cash flow: | $ | $ |
(b) Payback period (inyears): |
| |
(c) Average investment: | $ | $ |
(d) Return on averageinvestment: | % | % |
(e) Net present value: | $ | $ |
(f) Based on youranalysis, which proposal appears to be the bestinvestment?
Payback Period, IRR, and Minimum CashFlows
The management of Mesquite Limited is currently evaluating thefollowing investment proposal:
| Time 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
|---|---|---|---|---|---|
| Initial investment | $ 250,000 | -- | -- | -- | -- |
| Net operating | |||||
| cash inflows | -- | $ 100,000 | $ 100,000 | $ 100,000 | $ 100,000 |
(a) Determine the proposal's payback period.
Answer years
(b) Determine the proposal's internal rate of return. (Refer toAppendix 12B if you use the table approach.)
Answer %
(c) Given the amount of the initial investment, determine theminimum annual net cash inflows required to obtain an internal rateof return of 16 percent. Round the answer to the nearestdollar.
$Answer
