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
Homework Answers
Answer False
Payback period does not consider time value of money. Payback is more than project life means sum of cash inflows is less than initial investment. Without considering cost of capital project NPV is negative therefore NPV is always Negative.
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Q- A project which has a payback period longer than its life
also has a positive...
A project has positive NPV. The required return for the project is 15%. Which of the...
A project has positive NPV. The required return for the project is 15%. Which of the following statements is also descriptive (and meaningful) regarding the project? (More than one might be true) A. The project has positive IRR B. The project has positive PI. C. The project IRR > 15% D. The project has PI > 1 E. The project has a payback period that is less than the lifetime of the project. F. The project should be accepted.
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.
1. Suppose a project has conventional cash flows. (a) If it has a payback less than...
1. Suppose a project has conventional cash flows. (a) If it has a payback less than the project's life, can you definitely state the alge- braic sign of the NPV? Why or why not? (b) If it has a positive NPV, what do you know about its payback? Its IRR? Give some examples, if you have multiple answers.
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.
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...
Cas a llars) a. What is the payback period on each of the projects? b. If...
Cas a llars) a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? e. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A. B. and C. (Negative amounts should be indicated by a minus sign. Do not round Intermediate calculations,...
A project has a service life of five years with the initial investment outlay of $200,000....
A project has a service life of five years with the initial investment outlay of $200,000. If the discounted payback period occurs at the end of the project service life (say five years) at an interest rate of 10%, which of the following statements is true? A-The discounted payback period occurs at the end of project service life. B-The NPV of the project may equal or be greater than 0. C-We should invest in the project D-All of the above.
A.) Calculate the payback period for this project. B.) Calculate the NPV for this project. C.)...
A.) Calculate the payback period for this
project.
B.) Calculate the NPV for this project.
C.) Calculate the IRR for this project.
Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $140,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $855,000 per year. The fixed costs associated with this will be $212,000 per year, and variable...
A firm is considering two mutually exclusive projects with equal lives, Project A has an NPV...
A firm is considering two mutually exclusive projects with equal lives, Project A has an NPV of $100,000, an IRR of 12%, and a payback period of 3.1 years. Project B has an NPV of $120,000, an IRR of 14%, and a payback period of 2.8 years. The firm should choose________. Question 34 options: 1) Project A because its NPV is higher than Project B's 2) Project A because its payback period is longer than Project B's 3) Project B...
Calculating Payback Period and NPV Novell, Inc., has the following mutually exclusive projects. Year Project A ...
Calculating Payback Period and NPV Novell, Inc., has the following mutually exclusive projects. Year Project A Project B 0 −$15,000 −$19,000 1 10,400 12,700 2 5,900 6,100 3 2,100 5,300 a.Suppose the company’s payback period cutoff is two years. Which of these two projects should be chosen? b.Suppose the company uses the NPV rule to rank these two projects. Which project should be chosen if the appropriate discount rate is 15 percent?
1. Suppose a project has conventional cash flows. (a) If it has a payback less than the project's life, can you definitely state the alge- braic sign of the NPV? Why or why not? (b) If it has a positive NPV, what do you know about its payback? Its IRR? Give some examples, if you have multiple answers.
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.
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...
Cas a llars) a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? e. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A. B. and C. (Negative amounts should be indicated by a minus sign. Do not round Intermediate calculations,...
A.) Calculate the payback period for this
project.
B.) Calculate the NPV for this project.
C.) Calculate the IRR for this project.
Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $140,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $855,000 per year. The fixed costs associated with this will be $212,000 per year, and variable...
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