Page 305 question 1. calculating payback[lo2] what is the payback


Page 305

Question 1. Calculating Payback[LO2] What is the payback duration for the aftercited set of capital flows?

Year

Cash Flow

0

−$7,600

1

 1,900

2

 2,900

3

 2,300

4

 1,700

Question 3. Calculating Payback[LO2] Siva, Inc., imposes a payback cutoff of three years for its interdiplomatic boarding contrivances. If the concourse has the aftercited two contrivances conducive, should it sanction either of them?.

Year

Cash Flow (A)

Cash Flow (B)

0

−$45,000

−$ 55,000

1

 16,000

 13,000

2

 21,000

 15,000

3

 15,000

 24,000

4

 9,000

 255,000

 

Question 4.  Calculating Discounted Payback[LO3] An boarding contrivance has annual capital inflows of $2,800, $3,700, $5,100, and $4,300, for the instant immodest years, respectively. The allowance blame is 14 percent. What is the allowanceed payback duration for these capital flows if the primal consume is $5,200? What if the primal consume is $5,400? What if it is $10,400

 

Page 306

Question6. Calculating AAR[LO4] You’re intricate to individualize whether to diffuse your affair by architecture a new manufacturing insert. The insert has an installation consume of $15 pet, which get be depreciated straight-line to nothing balance its immodest-year society. If the insert has contrivanceed net proceeds of $1,754,000, $1,820,500, $1,716,300, and $1,097,400 balance these immodest years, what is the contrivance’s medium accounting revert (AAR)?

Question 7.  Calculating IRR[LO5] A unshaken evaluates all of its contrivances by dedicateing the IRR government. If the insist-upond revert is 14 percent, should the unshaken sanction the aftercited contrivance?

Year

Cash Flow

0

−$26,000

1

 11,000

2

 14,000

3

 10,000

Question 8. Calculating NPV[LO1] For the capital flows in the foregoing drift, imply the unshaken uses the NPV steadfastness government. At a insist-upond revert of 11 percent, should the unshaken sanction this contrivance? What if the insist-upond revert is 24 percent?

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Question 15. Calculating Profitability Index[LO7] What is the profitability apostacy for the aftercited set of capital flows if the appropriate allowance blame is 10 percent? What if the allowance blame is 15 percent? If it is 22 percent?

Year

Cash Flow

0

−$15,300

1

 9,400

2

 7,600

3

 4,300

Question 16.Problems delay Profitability Index[LO1,7] The Sloan Corporation is intricate to adopt among the aftercited two mutually odious pur-pose contrivances:

Year

Cash Flow (I)

Cash Flow (II)

0

−$51,000

−$14,400

1

 24,800

 7,800

2

 24,800

 7,800

3

 24,800

 7,800

1.  If the insist-upond revert is 10 percent and the concourse applies the profitability apostacy steadfastness government, which contrivance should the unshaken sanction?

2.  If the concourse applies the NPV steadfastness government, which contrivance should it transfer?

3.  Explain why your answers in (a) and (b) are divergent.

 

Page 308

Question 17.   Comparing Boarding Criteria[LO1,2,3,5,7] Consider the aftercited two mutually odious contrivances:

Year

Cash Flow (A)

Cash Flow (B)

0

−$455,000

−$65,000

1

 58,000

 31,000

2

 85,000

 28,000

3

 85,000

 25,000

4

 572,000

 19,000

Whichever contrivance you adopt, if any, you insist-upon a revert of 11 percent on your boarding.

1.  If you dedicate the payback touchstone, which boarding get you adopt? Why?

2.  If you dedicate the allowanceed payback touchstone, which boarding get you adopt? Why?

3.  If you dedicate the NPV touchstone, which boarding get you adopt? Why?

4.  If you dedicate the IRR touchstone, which boarding get you adopt? Why?

5.  If you dedicate the profitability apostacy touchstone, which boarding get you adopt? Why?

6.  Based on your answers in (a) through (e), which contrivance get you finally adopt? Why?

 

Question 19. MIRR[LO6] RAK Corp. is evaluating a contrivance delay the aftercited capital flows:

Year

 Cash Flow

0

−$41,000

1

 15,700

2

 19,400

3

 24,300

4

 18,100

5

 −9,400

The concourse uses an concern blame of 10 percent on all of its contrivances. Calculate the MIRR of the contrivance using all three methods.