6 questions
ealhazmi
problems_6.docxProblem 9-3 Calculating Payback [LO2]
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Buy Coastal, Inc., imposes a payback cutoff of three years for its international investment projects. |
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Year |
Cash Flow (A) |
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Cash Flow (B) |
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0 |
–$ |
64,000 |
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–$ |
74,000 |
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1 |
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25,000 |
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17,000 |
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2 |
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32,000 |
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20,000 |
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3 |
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23,000 |
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30,000 |
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4 |
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10,000 |
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234,000 |
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What is the payback period for both projects? (Round your answers to 2 decimal places. (e.g., 32.16)) |
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Payback period |
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Project A |
years |
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Project B |
years |
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Which project should the company accept? |
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Problem 9-4 Calculating Discounted Payback [LO3]
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An investment project has annual cash inflows of $3,600, $4,500, $5,700, and $4,900, and a discount rate of 15 percent. |
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What is the discounted payback period for these cash flows if the initial cost is $6,300? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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Discounted payback period |
years |
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What is the discounted payback period for these cash flows if the initial cost is $8,400? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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Discounted payback period |
years |
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What is the discounted payback period for these cash flows if the initial cost is $11,400? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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Discounted payback period |
years |
Problem 9-6 Calculating AAR [LO4]
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You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12.9 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,944,300, $1,997,600, $1,966,000, and $1,419,500 over these four years, what is the project’s average accounting return (AAR)? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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Average accounting return |
% |
Problem 9-7 Calculating IRR [LO5]
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A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: |
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Year |
Cash Flow |
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0 |
–$ |
28,900 |
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1 |
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12,900 |
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2 |
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15,900 |
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3 |
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11,900 |
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If the required return is 14 percent, what is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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IRR |
% |
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Should the firm accept the following project? |
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Problem 9-8 Calculating NPV [LO1]
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A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: |
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Year |
Cash Flow |
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0 |
–$ |
28,600 |
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1 |
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12,600 |
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2 |
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15,600 |
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3 |
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11,600 |
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What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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NPV |
$ |
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At a required return of 11 percent, should the firm accept this project? |
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What is the NPV for the project if the required return is 25 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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NPV |
$ |
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At a required return of 25 percent, should the firm accept this project? |
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Problem 9-15 Calculating Profitability Index [LO7]
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Year |
Cash Flow |
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0 |
–$ |
18,100 |
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1 |
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10,400 |
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2 |
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9,300 |
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3 |
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5,800 |
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What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161)) |
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Profitability index |
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What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161)) |
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Profitability index |
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What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161)) |
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Profitability index |
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