Which of the following is true of the cash payback period?a. The longer the payback, the...
Which of the following is true of the cash payback period?
a. The longer the payback, the longer the estimated life of the asset.
b. The longer the payback, the sooner the cash spent on the investment is recovered.
c. The shorter the payback, the less likely the possibility of obsolescence.
d. All of these choices are correct.
Homework Answers
Only option C is true.
Payback period is the recovery period of initial investment in a project. If the payback period is shorter, firm can recover the invested amount quickly. It gives relief, since the fear of machine obsolescence is gone.
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Which of the following is true of the cash payback period?a. The longer the payback, the...
Which of the following statements is correct? C The payback period is the length of time...
Which of the following statements is correct? C The payback period is the length of time it takes for an investment to recoup its A) own initial cost out of the cash receipts it generates. O B Projects with shorter payback periods are always more profitable than projects with longer payback periods. C The payback method of making capital budgeting decisions gives ful c) consideration to the time value of money. O If new equipment is replacing old equipment, any...
Along with the questions, is the first one shorter or longer? A project's payback period (PB)...
Along with the questions, is
the first one shorter or longer?
A project's payback period (PB) indicates the number of years required for a project to recover its initial investment using its operating cash flows. As the theoretical soundness of the conventional (undiscounted) PB technique was criticized, the model was modified to incorporate the time value of money-adjusted operating cash flows to create the discounted payback method. While both payback models continue to reflect faulty ranking criteria, they do provide...
7. The longer the firm's accounts payable period, the: A. longer the firm's cash cycle. B....
7. The longer the firm's accounts payable period, the: A. longer the firm's cash cycle. B. greater the delay in the accounts receivable period. C. less the firm must invest in net working capital. D. shorter the firm's inventory period.
Q- A project which has a payback period longer than its life also has a positive...
Q- A project which has a payback period longer than its life also has a positive NPV. True False
Given the following cash flows for a capital project, calculate its payback period and discounted payback...
Given the following cash flows for a capital project, calculate its payback period and discounted payback period. The required rate of return is 8 percent. Year 4 Cash Flows $-44300 $11950 2 $13350 3 $19000 $8000 $3000 The discounted payback period is 0.16 year longer than the payback period. 0.80 year longer than the payback period. 1.40 years longer than the payback period. 1.85 years longer than the payback period.
b. Payback period (Round your answer to two decimal places.) The payback period is years. c. Discounted payback period...
b. Payback period (Round your answer to two decimal places.) The payback period is years. c. Discounted payback period (Round intarim calculations to the nearest whole dollar, Round the rate to two decimal places, XXX % .) The discounted payback period is years d. Intemal rate of return (Round the rate to two decimal places, XXX %) The internal rate of return (RR) is e. Accrual accounting rate of return based on net initial investment (Round interim calculations to the...
23. Payback and NP a. What is the payback period on each of the following projects?...
23. Payback and NP a. What is the payback period on each of the following projects? Net Present Value and Other Investment Criteria 371 Cash Flows, Dellars Project Time: 1 5,000 1,000 000 3,000 1,000 1,000 2,000 3,000 5.000 1.000 1.000 3000 +5,000 b. Given that you wish to use the payback rule with a cutoff period of 2 years, which proj- ects would you accept e. If you use a cutoff period of 3 years, which projects would you...
If a company’s account payable period is longer than its operating cycle, then which of the...
If a company’s account payable period is longer than its operating cycle, then which of the following is most likely to be true: A) the company can avoid paying corporate taxes on earnings retained as cash. B) the company’s future cash flows will increase at a steady rate. C) the company’s cash cycle is negative D) the company pays for its inventory before it receives payments for its sales E) the company’s cash cycle is longer than its operating cycle.
Payback Period: Initial Investment Year 1 Cash Inflow Year 2 Cash Inflow Year 3 Cash Inflow...
Payback Period: Initial Investment Year 1 Cash Inflow Year 2 Cash Inflow Year 3 Cash Inflow Year 4 Cash Inflow Year 5 Cash Inflow Project A 100,000 10,000 10,000 20,000 30,000 30,000 Project B 200,000 50,000 60,000 90,000 60,000 60,000 In years, what is the payback period for Project A? In years, what is the payback period for Project B? Based on payback period, which project would you recommend for your company to pursue? Initial Investment 1st Year Cash Inflow...
Which one of the following statements is correct?
Question 5Which one of the following statements is correct? 1) The payback period ignores the time value of money. 2) A longer payback period is preferred over a shorter payback period. 3) The payback rule states that you should accept a project if the payback period is less than one year. 4) The payback rule is biased in favor of long-term projects. 5) The payback period considers the timing and amount of all of a project's cash flows. Question 6A firm has $6 Billion in debt...
Which of the following statements is correct? C The payback period is the length of time it takes for an investment to recoup its A) own initial cost out of the cash receipts it generates. O B Projects with shorter payback periods are always more profitable than projects with longer payback periods. C The payback method of making capital budgeting decisions gives ful c) consideration to the time value of money. O If new equipment is replacing old equipment, any...
Along with the questions, is
the first one shorter or longer?
A project's payback period (PB) indicates the number of years required for a project to recover its initial investment using its operating cash flows. As the theoretical soundness of the conventional (undiscounted) PB technique was criticized, the model was modified to incorporate the time value of money-adjusted operating cash flows to create the discounted payback method. While both payback models continue to reflect faulty ranking criteria, they do provide...
7. The longer the firm's accounts payable period, the: A. longer the firm's cash cycle. B. greater the delay in the accounts receivable period. C. less the firm must invest in net working capital. D. shorter the firm's inventory period.
Given the following cash flows for a capital project, calculate its payback period and discounted payback period. The required rate of return is 8 percent. Year 4 Cash Flows $-44300 $11950 2 $13350 3 $19000 $8000 $3000 The discounted payback period is 0.16 year longer than the payback period. 0.80 year longer than the payback period. 1.40 years longer than the payback period. 1.85 years longer than the payback period.
b. Payback period (Round your answer to two decimal places.) The payback period is years. c. Discounted payback period (Round intarim calculations to the nearest whole dollar, Round the rate to two decimal places, XXX % .) The discounted payback period is years d. Intemal rate of return (Round the rate to two decimal places, XXX %) The internal rate of return (RR) is e. Accrual accounting rate of return based on net initial investment (Round interim calculations to the...
23. Payback and NP a. What is the payback period on each of the following projects? Net Present Value and Other Investment Criteria 371 Cash Flows, Dellars Project Time: 1 5,000 1,000 000 3,000 1,000 1,000 2,000 3,000 5.000 1.000 1.000 3000 +5,000 b. Given that you wish to use the payback rule with a cutoff period of 2 years, which proj- ects would you accept e. If you use a cutoff period of 3 years, which projects would you...
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