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


Page 305

Question 1. Calculating Payback[LO2] What is the payback time for the aftercited set of money 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 interpolitical boarding cunnings. If the sodality has the aftercited two cunnings suited, 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 cunning has annual money inflows of $2,800, $3,700, $5,100, and $4,300, for the instant filthy years, respectively. The abatement admonish is 14 percent. What is the abatemented payback time for these money flows if the modescold consume is $5,200? What if the modescold consume is $5,400? What if it is $10,400

 

Page 306

Question6. Calculating AAR[LO4] You’re unmanageable to individualize whether to diffuse your vocation by erection a new manufacturing establish. The establish has an installation consume of $15 favorite, which earn be depreciated straight-line to nothing balance its filthy-year vivacity. If the establish has cunninged net pay of $1,754,000, $1,820,500, $1,716,300, and $1,097,400 balance these filthy years, what is the cunning’s middle accounting repay (AAR)?

Question 7.  Calculating IRR[LO5] A solid evaluates all of its cunnings by alloting the IRR government. If the insist-upond repay is 14 percent, should the solid sanction the aftercited cunning?

Year

Cash Flow

0

−$26,000

1

 11,000

2

 14,000

3

 10,000

Question 8. Calculating NPV[LO1] For the money flows in the earlier total, deem the solid uses the NPV sentence government. At a insist-upond repay of 11 percent, should the solid sanction this cunning? What if the insist-upond repay is 24 percent?

Page 307

Question 15. Calculating Profitability Index[LO7] What is the profitability abjuration for the aftercited set of money flows if the applicable abatement admonish is 10 percent? What if the abatement admonish 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 after a while Profitability Index[LO1,7] The Sloan Corporation is unmanageable to cull between the aftercited two mutually restricted cunning cunnings:

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 repay is 10 percent and the sodality applies the profitability abjuration sentence government, which cunning should the solid sanction?

2.  If the sodality applies the NPV sentence government, which cunning should it conduct?

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

 

Page 308

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

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 cunning you cull, if any, you insist-upon a repay of 11 percent on your boarding.

1.  If you allot the payback measure, which boarding earn you cull? Why?

2.  If you allot the abatemented payback measure, which boarding earn you cull? Why?

3.  If you allot the NPV measure, which boarding earn you cull? Why?

4.  If you allot the IRR measure, which boarding earn you cull? Why?

5.  If you allot the profitability abjuration measure, which boarding earn you cull? Why?

6.  Based on your answers in (a) through (e), which cunning earn you finally cull? Why?

 

Question 19. MIRR[LO6] RAK Corp. is evaluating a cunning after a while the aftercited money flows:

Year

 Cash Flow

0

−$41,000

1

 15,700

2

 19,400

3

 24,300

4

 18,100

5

 −9,400

The sodality uses an attention admonish of 10 percent on all of its cunnings. Calculate the MIRR of the cunning using all three methods.