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    k;efkvh khef v

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    k;efkvh khef v

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    6 views68 pages

    Chap 5

    Uploaded by

    The flying peguine Cụt
    k;efkvh khef v

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 68
    Setvcoeu ne cst oor 6 ome &@- Q fem eno er _Chapter-08 - just for material i ' © rents Chapter 05 2 re dferencebatcen he reset va cn fame Tnesnen fae sab bean na coe Irrgang Wo oh aS ° A etree abe 3 ‘rable eu een 8 ect 5 frei nde neat e eared ack . pete wT 2 ‘wich stant concenig he et resent . Yim ae Knob To. “value (NPV) af an investment or a financing Seed cora? |e a: Sete bee . ae ==» seas aoe : oe Ea « Sata aeeea 2 2 amar ae gies ne oo : eer ieee =n a ‘Tre fn of te reules fr an invest gerart sath Rowe alert recover the il oat he ncetmer ell he a cash pero e retworing pil eto © seal pc F 8 peti nex e ‘acogned pavtack evo 4 ‘An inesimentisacepatio the payback a isles han some are Seis per of © isrenatve 8 Sloper Specie er of e ‘seal, ang oniit ig equation tne “Tre eg of ie requ fr a rjc scutes fs el he lcs of ‘he preci eal he Desentvalve payback pr Secours pote iron ‘scouted pytack eros. ‘The dscouted payback estes tt you Seni acept an resort poet es ‘scoune paybck peroa e Secon ord of Is postive ard ‘eeced reas, payback pe [les hen some re Spec perndf Sete ects “Te acount ate hat aks he net mesa ‘elusofannvesment exactly equal 30'S caiecthe cetera toot. erage sccouing peta de: avaer inna pce is ccetale as RRs exact eau te et reser alee PV) rect caval 1260 pester nan the ‘Seco ae lees tan the scour rege. ‘The passnity tet mare han oe Scone ate ‘ats he NOV ofan meses ea a {ao present he pram refed 0: retpresert ae posing ean ambi ery ech loveamart dct, . ‘Sous of see e uli ates of 2 uaon a wren accepting ae iestnert Drovers the acceptance after neste a retprvert aie pete 5 pean ambiguty « usualy excusve Invesmart din, peti. e ie tes of ‘eum dates ‘The preserve of an imesment ure sth ons ded by be a cot of be vector ‘Sebedne petpeere ae sree seming prota nde pote perod an independent invests acceptable the fetes dex othe ester Eisthan one ‘pester han te ema ore. less tan he era fate feu (pester nana pe Species Allele conan. net resent vate of ‘peal meson pox creases wen aches into is tay by oe year. ‘ein om ots Doe neases aces, Shing hens yet istend pes Prowghout pois Wi ting a8 ‘re primar reason hat company soc wth Dose et resent aos ae coriered secetlle thee A ey cee vale be oars ot 8 De priest ‘st finan cS hey ret the sl tach ot win tree years ores . eremied cash 5 beinvenments cost ious Hajar nas et present ae eau A trea eae ate prec enceds the Desenalye ofthe Bef taca Sense c the pret produces thins at Sleeasine minum ‘ered ona . fy dln roeion ecu be preets Move Pease, 5 Bedscrne se reed he eral ‘ae fren ay ave Canteaip Netpreset vale A cant ete hen tien bene 0 uualy excuse 8 Brenan Cerpaing teen Stedpoecs, israroy used by sna fers aecoring oe Graham endtianey sone. lect as wel ued ntenn pyc lovores tne eekota pres Payback tequenty ved to analyze ‘npr prot A ne eharsetnit ofthe prec analyse se inconers ne tine Valo ot mene. relevare cash fos tremeudedinte rays Hey eects isthe most esl anya! ‘remo fom franca! perspective itpoouces beer tecsione tan ate mage wang et" payback method stancaceed ct pr foreash tow rscerson, as ova ay. const tne ‘ileve ofeach roe {scouring ot al cash leas equal ne payback oad fr a projet ‘sl ecreaoe neces lo cost nress, proce nesses ‘sed dacoune ‘ae decreases th ion re Iroved erie ne Girton ot a projets tegenas ‘he dacourted payback paid a a project it A acount ate sted negroes ineeaeed in each oa of wotaea” ve poof he Doers crass projec cach tows Iereates (tof th es sees eed ne pres nceese “The iaeouned payback re may ens projects wth Boones peytack pevodsin excess Broprioctetetobe ene, most eid Dec toe eocted Frtavr eles a proets oes be Feorecty scented Siero prorng ne Sere pects wth reg net resent (ae abe Sorte postive net presetrvalue pects Erbe rgecea er insane precy the eternal te of eure RR leindeates ecenrce ofan ‘irra lessnanthe Geese Ist ate generate Sale by eecash togetoe iced pany o Varina a05 ener present luc lapraeco saul epojeats inal Can eect te (ede compare at ‘oe of pects ‘neo coe othe projctean be Pete amount breach intone ach enh iow is (rere ore yar aor Sin oigraly procsee thereat rate of tre iseane at is Ireesend “tral at of eu Gecsion making tot ane preserve whenever you we forszring mataly ‘lasie peer, elt Inaies te net reson Valo equal oe onal using @ projet ast fons fsthe ony souce of frou. Sperone inte manewace, Sern ‘hen doting with Unesnveroal aah tows, A aser or ranogers Besmprenera tan bhenotpressnt vee, fewer secure ‘renner en tow comatose au igrored by most fare anager ‘sed pinay 0 ‘erate toes sy excise pres tales proce sea tien Values aah ‘You ar wing 9 detrmin whaher to acces Prac Aor Proje 9, Tese projects oe htily cs. pa of yours, you ‘rel comoute re incerta RR Inverse ores Lerch Soe! each poet. retpreser va of Senate freee” Sisco ae hat, ‘Sreonad pybeck prods tor eoch rect, ‘Seca ae hat Figkes te nes resent (ius of carne forme terencee thecach owe ene tmoprons, empariog the NEV profi a aniruesene frost hare arcing pe omonsraas why be lorem ee varies wih erges in ieee Investments 8 Te epnoate ofthe ‘le Beiana prot. Iie span ofa pie bets ne dessen as tenn rower Sete Neve totnrong prec sth ferinvesenere rapes. Protest dex ane Frenerpresentvaue How shad profit ind of ser be inert? ofthe cashflows Shosequent tothe inat cash ow fequalto (1 intial cash few, 8 The pojct nas an ea a fete gua ne dsc © “he pies prosuces forever year ots We B The pent cash fos subsequent 0 breil ssh Row fine apesen valve ‘he prtiatity ind: A ‘eon rau in (heine at codes wnt dections nsed en ene preserve re teolwneninseonent ics eed 3 « . leads ora Poets seein ering ch 2 a een e Produces resuts ‘hich ely are you wares review aria tom abnete (ox pespeste, you shld see ‘metodo rays retpresert ae payback Fecal a of tn canted paback pets dex Wich oof ho folowing ihe best example of we mutual exclusive procs? A sig a Feel euet Se by oe 8 bin scion. eauoren anaes boty (ests and chavs Sano c Feneng outa company renews o sling pay . tira company Sle cena womose {She olson does sracocss e bv bath nertry fro eo sees uang Prieta isoperinga bakery 210 Corte ‘Shes, Proj open aspects ‘top ene same sess. ba press have ‘hebrew, that Bah pees ave postive ange cash ws occ ‘Stoning ena ineznere When yo Glcce wi pret seep, gen ant ‘nang accept eer you sh ey st envy onthe mato of anaie rots nde payeack et prevert ae Sacooted payback ‘aang wo mwa excise procs fain sue Bom poets nave Scarves Pej A NPV $1,209, x payback eto of 2 20 yon an If 9 prea, nda dacant rate of 136 perce Profct 3 fas sh NPV of S07 payback pena oh io yon ania ot 124 poreane na a Gscoumae of 128 percent He cn aod 9 {and exter ro, tutrarbom, Mashed sort A eject because of fs payback porod| 8 Both pofets as they Bot ravepesve . Prete base ont . Pen ot . ether poe based Gnas te ations more cooemed about the ack ‘ournot sna ives na is about be Sotto evelute a capt prec ura the Imahod of anaes. € ‘road nel se payback . potty nde Ne mar how many toms ef inesmer. anayesyeu empoy apectmay very Sigeanty fom he ‘rps esl 5 tener at ot ‘uml ales produce he most ‘ele ents c BE proiectw never be siecies less te payback peed every vy erscerey rom he e bythe ese tew Yess of apa eve het na rich of teflon memods of oie sara are aso tarde sho erm pros? rota dex and Fema at tres facountd payback fra payback netpresentvae a Payback bryback end peta dex Protea dex ona coed pyar Mt aprojet is assned a equi ate ot etn fate hen A esmingotee projets ash fous Fag bearag onthe vu she pect bepress be ecceres pret ays be ese see he pit wilebperd one Sango ech te pet con reer harcore ‘ou ae considering a project with the folowing date: ternal rate of etn 87% Frattapity ratio 98 Net present value — 5595 Payphee peviod? a years Regured ‘atu 8 5% When one ofthe flloning is ‘Correct given tis information? A ‘he cota ea incomputng the hatha es She decoumes| pusback pee wat Retro teas en 2k year, Se dacouncate sede eompue he prety ro as Enos oe meal fate fret “hipaa seal be scented bass on the profeabiy re, “hiepreat shal be reectedtaseg one (ema eof urn ‘Accoping a pose net present value (NPV) braces, ie ne projet ‘ilpay back we te eauted prod of eens the prosere Vale of he expcies sh ows seal to Repoetscos. levees erent "es wha he roe buaarces al cash few egsmators wil teveaice iSerpectd > ‘Sockhalders value by ‘The a preaatvaue method af espe going ara doos a fhe llwing A incorporate sok no the erabs, 8 ovarian (Sh Bow nro Ue al ofa piece ‘eshte ‘seat le tosh tows Proidea specie ‘The payback method of ana incur ath ows. innocent cot Sha utes al project cash hows pple an nusiy- Shoe recxamere peo e ae ining is ho managers sogesthaigrrng alleash ona ellwng the ene pack gerad’s ‘ata faw fhe pay meade ‘aol beget ahs? ‘he payback mato Paytackis aver teed in rel pent cremate no ‘Stermce how ‘cote py ne ies ‘cash tows ater ese year are Ig iecerae 30 irl em Tesco te katy bre esunng ered payback vod ar saan, ravages a use rere te paibeck wie cash foe ater be esigned paytack pesos are rely Sorbie ody’ Sots so lana temas ‘erent Iai ne cash foe ater tne ecued payback toa arty hve any hee onthe Steptoe decison, Isthe mos teaserdy Weed method oh ‘spel buen raves. Sepscatod mato Fanaa cunt petty dex ns th ie ‘ees malo recs where he tl eau be fron relay sn, ene ests in Gacsionetna cont epee by NPV anaes. ‘The discounted payback metas ‘ake of money. Cisco te ot ost ‘scouts tea ISeretered the Igrores poets, ‘The pvback method e eerines sano pomuco hata Bonevdesatbe econ y he avec pred ve. (eteries se pont eau oe pen where ia faptal rvesinens teen ‘ecues an abirey pone "ares he cut sir, Vinee acetate ees, israrey used in til parca “The mode innate of et NeVesesiaions ene ony eta Paes ‘evant male fecenuree econsunen no ssigea Iseamputed by ming ea ows nao ane aie sssumes allies Searing jets. A may excisve pe is projec whose ‘econ has ne fet rere ores Nevisahaye eget IRR ays regu secepce econ ae ater prec, ‘hs more than fone san carga desis ae he a stray eterna of SSecoun atesnatne fale a conser 8 van Cerernason of eoream andthe feice cones tayo moval Bree mvement proces. cS sera erernacon ot ‘Sseoun ne and ne te ofa post. . fee conser Intl engenders naire wo cvecty Stayee my elie investment prec. . fares conenty trayes rave Ercan neste process end be Frum ae oer protien. 2 project i ve noe than one RR, ry oni oe a inary Ris postve 5 iar RIS regeve, 8 (ah Bow pater ‘She mora haa he sn cnange e ‘ach Bow pater ‘nbs aay ane Sgn ahve Using teint te feu mena Cenverdealinvesmee poet shoul be ‘ezeped the eral ae fern equal to he scone (pester than the enone less tmante acount . rege e paste recs best dted as ho A deco ate hat 8 ‘terenes been Seman an oF scone (eerie tke ae, . rena aoe br merageren Cane cared ora seecate Fe IR projec ht are anu cave sreveereato sate a aco and Seale prblens 8 tig ase protien. trina ese . als and ceersiog few ction. 5 tring a reversing Fogler 3 Assume you use all ayalele mn 0 (rane proces Wihere ie acanbct inne ‘ised deison betes no uty nce peace de to he based iets, you sou A sect th peace es bom 5 famine bth poets ire ore erger roe cS fnpore hear Feyonttececon intcated by NV eos onthe payac eos . fect project (evo ameeny in te aoccin makina proses 5 ‘The prota index ofan ivesien ret is Se atoat ne A rag rete ts inves. torte surere raat ‘fines cS et presen ae of thepraeets cash tuto ced by canons tren peeeicash Eesti al cos. e presenta ofthe ‘ime Dana subsequent cash Fens 0 he ss Weich ne of te folowing seamersia me? A You miathoon ne eo neo Yeucen comput the IR wines Parnas (dees te 8 ow musthave a Srtnddacowned pack 6 Pavoook wes the fat apeed nthe NOV Senin . ening projets fanny eer have one. e Discounted payback ‘eaverernettoe ran payeae adi or feaveny used Invacsce Graham and are 2001) furd ta. vet evo mos pop apa busy IRR and payback "a and NPV NbvandPI Tr and mode ‘scoured patack Whats the netoresotvalue ofa pcecth nile e660 ar cst oo ‘especialy? The dscourt aes 13 perce e972 81,195.12 =s1.38049, oat ho et reson value ofa poecthat avant eash culo of 27nd easy "os of $1290 Yo, 35 980i oa 9, ‘e827 Year The dicount 125 . e206 e ‘A poeccosing $6,200 nay shod prodice ar news 600 yon eo Jers. ‘tna isl a he Yr cma teach mount 8.50 hata Seneipesenrabe ofthe peje tine ‘eolred eof eurns Speen? A sors Mats conseing a rasa ‘econ pres hat nt ee epete. The ‘eee eurn 58 pce Prog ‘svn cot of 2600, nd shou pose oon ot Se 400 Se6.00 end Sa T00 {Srvcus 11, repecvely Projet 8 es an ‘a eon of 38 and Shou poms Indows of, 9.0, ard 82100, Year {respect ich more o pes Serer shout be acpi ar ry? a Peja baause its Nevis paste une Proect is nevis reasive 8 Paget becuseie Feaued rate ofroun cS Peja: because t haste loge Senin . Projet becauseit Fase negeive ev ‘veh rae . Teaser nae en NPV equal ‘restr han nal ‘Sun Le’ considering two mul excise recs fat have heen aerate ene Sscoun ate of 08 peeert Project aes 2 Iti oer Sea s00 pnd shoul produen cacy ‘lows of $15.00, $8500, and $1 70 for ‘Yeats, raspecivey Project Bhs an al cis of 73400 and shold produce cash tons of 0, 48,300, ra 800, Yoas 2 195 repoctvely Wats heineemertl RR? 15.40% “ee ieee Bernstein's proposed prolect has an intial, coe er elas Sub and exes flaws ot 64-300, $98,300, and “$15,800 for Years 1 t'3 respectively Mall nogative cash flows are moved te Time be aiscount fate of 10 percent wha Is the mediied ig st Luce is relwing a reot than eta costo $30 70 and cao ntiows ofS 60 $1660, ‘saad aoe Years 1102 tempers ‘Should he projectbe accepted ft has boon assed equred ern of9.75 pace? My ray A ys: because he RR ‘recess he eaured Faun by S¢parcont 8 es becuse ne RR essen he reed eu by 28 pacer cS fs because e RR Ieeroseds ‘eauied etm by 46 pecan . Povbossuge mR bree re eaured Fetum gy a3 percent e ovbozmige he RR onyao pecan ‘Youre consdetng wo indeponden projets sth he se achat ort pecan Drjet coms $754,700 ara has cash vs of ‘reo, 5105 400, and $159.00 frases 1 Tresedively Proj cana 215000, a, Fea ca wo 80000 yo fr Yer 12 | Npwive scone nce fnance ay econ yo mate When proj or oes (ner seul you sea ary? A eject A beaut Fase omer Nev 8 Pej becuse is Tr enceees the Uisearote « bon pokes brenice er NPS . Prat becauseit Ist gers freee waa postive ee . reser poe, Deca ne NS frees thon he lu Bd Caf is considering a project with ‘nit cos of $46 800, and ash home ff ¢8.500, $25,000, $10,000, and ~$.800 7. iets ovata You See is projec to have? | oy Wels preiets cash ows of $12.50, 520400, ane $2000 fr Yours ro ora ree th an nal os of $5000. What Se praligbly index ven an assigned assure wots pee? . Fos Flowers hs pie costing $40,000 and Gd hows of Sens SuB(00, a $22 TOD er ‘Yeas 1 3 respocively Based one relent ier shoud he poet be Stzeped ihe ccaur aie Speco? Way ory ne ‘Yes because he Pris Aaa considering wo reasve No because the is No, because ihe P es ineaeper rect (eth yer bes Both pric Fave toon ‘Signed a dacoun rate (113 pacar She has ‘22d fndoto ance one Soa poeta Projets ons 28300 and has cash fos of S180 ana 29,10 fr "oars 1 an, Teepeahely Projet cows $61,000, ard has (eh tows of 20000 ar Sha respecte, Wh pret oF pj ‘Sine shuld you soseat based on he rteathy iex matod ‘issn tr tat onto? raven te corest both poet aoe toh other Pisare paste Noushoua acces Projet a'sree thas Beige lard you ‘ony selene Youshous scene both poet aoe yee ‘oushou ey sect igjetAsince thas he wees? etn: projesi 0. Te, aproect marage wants a inestiaa project wir an inal cost of $6800 and cash oe $3200 and $3500 in Years an. Festa hs boss, reaares a dcout tof 10 DBorent anda get of 8.10 tod’s otro every $2 vente Wl Teg 2 ‘rec eoowed? Why ory 00) ‘Groat 8 eine ei ce Ys: Because bath . orbeeauee 2 Poles does not met ther requrement e rau tne re, Feautemont 70 tl gost 3.00 to sure sali eam (Cat Ca sles we expedite 1 a00'8 eat for oe yous. Aer he thee years the Garis orpeaed obewantess acer ‘Stpesedemaring We oft cooing system ‘Whats to paybeck ped ofthe tear ayes Leayeas 2anyeas a ‘You ar consdeinga poet ann ost oF 84.300, What the payback ped fr his prsestifna cash os we S550, $370. 5200, nd 8800 year Years 104, respecivey? 8 2abyeas . aotyeas e a2byeas cc A priests anni neo 2250, The cash, Infos ar 8,850, 8900, a 8700 Years 2 12a respocorly What othe payback pred? 27 yeas 2eayeas Ssbyeas Sszyeas Jc i cinidrog ain ots gene ‘Sor He ssimares ne ae ny on wl Se 84200. The remadeing sr sheng as sree a S100 Toy aes ae expected ‘3 trooon et annual ese oneoS1508, $5i500 81 oo angi 59 ove the nex four ear expecta. Soul Jock ad yates Tarchande te eautes a eeyear payback Dota? Wy or wy ra a es; because he asec peed = 2otyear ‘A precthas an nti cost $10,600 and (roees cao inion o $3,700, 54550 a $2500 fr vers 11 3 repost’ Whar iste ‘scouted payback potoa ee requires ra of ‘eure pecan? 2esyeas 2otyeas 2B year Homer is considering apo wth ash intone of 060 a yoarfor Years respect. The Drecthas a equa scour ate of tt ora ar anal ost cf 2200, What ihe {iscouned payback pean? A 05yeas 78 23byea 22h year Ginay is consiering an investment Coating $83,000 tat hag eas fos of $5,000 in Year 4, Ginny requires 8 rate of ietum of & percent an has 8 required scountea payback period of thew years Based on te dlscauntea payback ethod Should she make tvs investment? Al {ings cosidered, do you agree wih this Secision? Why or wy Ret? a yes; because he NPV ‘Sposave anne prot ay bck on Eeiscoomes bess ‘inthe sored tine pened 8 yo bt ely because bre scour prvback eauremere ce Por athough he reer eams ere Pan percent here ‘sno ston wher repre canon back ons ison ress . to becsuce he (een aybec pevod sto shot 5 Yes, disourod Payback mates cence bt ais eNPY is regave nate tl ean iow igre by pbc Prjat conte $4500 ana Nae cash fos of ‘S200, Sedo, and 0 000 frvews 12 (pepecivly Projet has an al cost of $70.00 andhageaen tows of 90000, ‘especie What ste ered AR OF ‘Seseoematualy caste press? A sens 14.01% . 18.75% 20.30% Prieta anal ost of 75000 and ‘annua cash os of 855,000 fries yess Peja 8 cot a0 000 ard has cash Rows of ‘Se2no, $90.00, ena 3000 rears 3, ‘eepechvely Projet Aare ave muah ‘Fe requrad rate isrigner tan te GOR fa thenDroeet-—- Sul be seeated ‘A propsed new verte wil os $375,000 se ‘Sout proaice anual cash flows of £3,500, $95.00, £40000, and $0,000 fr Vers to ‘especialy The requved aye peed and ‘scouted payback poroais 3 years. The ‘Gscoun aes 8 percent. Which methods In projet aceptnce and which nce praesrecmon? a pve rect ‘scoured pytack ‘eject: payack, (Scout pvback inet Nr (erates payback sect paybsck ‘seated pavtack rect NPR, PI sce NVR feet Pavan, (iSeouned peed ‘financing project hasan initial cash tnfiow of $22,000 and cash flows of = ‘Yeors 1 to 3, respectively. The required Yate of returns 13 poteent. What the internal rate of return? Shaul ne project, besaccencea? 352086 capt 15.20% rect 13.408 rele Fyre Down Under Stores is consdaring an investment with an intel cos of £236,000, Yeor 4 the project wll ‘aura an aaditonstinvestment ad fialy, he role wil os shut gown nh ‘ear, The annual cash fons for Years 2 {07 espectively, ave projected 35 ‘$64,000, 37,000, 391.000, 348,00, $122,000, $154,000, and ~$30,000, Mal egative cash flaws are move to Time ting a alscoune rate of 13 percent, what ‘Sth projects moaned BA? were sao Peja Xa a iil cot $20,000 end @ ‘ath shone 25 OBO Yar 2 Project oa $20,700 andhascash fows of 812000, ‘espeahily The dscount ates percent nd ‘Repent ee muna ees Bases or the aie projects Re you sod sect Project based on HPV you soul accent. Project te nl een Sad ete scene ‘You gr considera mo independent pojens {anf eng eauremens Pro Tas ‘ogufeg oun of 22 pecanicompared to rojas regard eum of 95 person. Project ast 75000 an has cash an of 21000, 48.000, and 812000 frvews 12 ‘epoch, Projet ha an tal cost ot ‘S7o.00andeash fous af S500, S100, land Al foofor Years 119. esata. ven ‘is ifomaton. you sha A seco bth Prost A Sra Praer & 8 ScepPojest And fee Projet ent Preieet Band Feet Project ‘eet bon Prot bra Proven ecepinnichevaone youn butt bath rn me “wo muta exosie procs have year Nes anda equ ras otroum of 08 perce Proje costs $75,000 ar has cash ova a S000, S290, ana $2.0 Yours 1 3 respecivey Projet Beasts 372000 endhas aan fos of 22000, ‘epoca Using the RR hen re, brome eher shoul te arceptea? cept bath sees sce pone Slanicar orerco betoeen Sem secepiProjectAand Fee Praja secon. Band geet Proje ‘ese bom poets Leste charged wih detemiin wien small Drejecs shoul be ned Along wih is ‘Ssganare, ae ha boon gana he use of $SI5G00 fora manmum of vo yeas. Shae Girsdeing ee pies, Pieet costs ‘oon and ras cash fows of $4600 yee for (aay Howse 00, 600, ard 23.000 ‘oars 3 respecive Project ccs {$200 and ae cath nw of 2500 in Year lina dacnane sous she she regarag, fase projec she asa tem a mancnany ‘Fscoun ate oF percent? expan why secant ater Projets Rend a Pojace 8 nae, bat nea tres ae hee Weir traneng sccen Project and feet Proje Seca ont we we role o8 ‘iene payback trains han ves c (tenes And ‘ Gand eee Pret 8 bey have the Shonen decured Peomretertty ». Seen: Priced Eandveseerrmecr 8 Shand pmbact Sin wo yes 5 fecent Peds Bard Eoptreci tree a Semsconbineten ‘Senne rom ntl se . hans conssering wo independent ries. Dreect coats 874500 and cash tow a 518,700, $48 00, and 812,200 or Yrs 10 3, ‘espeatiay Projet cass 70000 arth (ath fos of 10800, 815.900, ana 987900 for ‘Yous 3 respecive Juan sesns a es Escount ro 10 pereeite Project and 12 erento ject € When pret or projet, Se steal Pe acuptbased on te rota ae sccestbath jects econ Project Aare rec Proje. Srcept eer Rar, baer bee ‘ec bo projec cep Paes Band reer Prat 26 vest eur $2750 athe of ‘ne yer wth no isk ve he, uk at A ig zo aay given ‘scout, 8 isrepaive be i Feared vet ess fra 0 peeere ce vals LOE ‘ected ens 10 peront . er Fie equced ‘sums equa 610 fy aven dscaurt Conic an inesmert ith an iil cost ot ‘Stoo nex cnpered afr yee The a fcoh in Yonedana fare $5500 ene, ana he ‘esas fon $1200 assume each anol (a2 fog sread every ove ax especie ea Whar te psyback pied? S18 yea azyeas 00year ‘S50 Noe a hese 5 ‘rduces cash flows of 5000 array for 5 {ers ech cach fow sored evenly oer is ‘apesive yor Aa acour re 10 pore, ‘whats oscouted payback period? 00 yea : 22tyeas 2abyeas ‘An nese poet has an ini cost of $260 {cess Hows 875, 5105, 8100 and 89" ‘ous It respecivey The costof cata TPpecer Whar ste dacowted pybact A s76yean 7 € 2S yeas 5 Sesyear e As2yeas An invesiment cot $1000 with expected cash oof 33,000 yea for yours Ae arctan RR eats zee 1 21.00% An investment with an nal cost of ‘54.000 produces cash ows of 3.400, — $500, 52.800, ~ $100, and s6,000 for ents 1105 respi How many BR's oes tis project nave? A propsed prj east $200 en nas sh ‘rst 30, 0, $78 and $0 for vere 210 ‘rempeahy Besse eis gh ri te rer has beunssigned a Sarou rao 6, Boron dors, Few mush i he pace ‘Fetus today’s dors fr every $1 vested? ' | 218.00 project as equal annual cash ws ‘vere Tere, Here courted payback eto seven year arate scout aes Urata the nut ofthe cas own each ft seven yeas? A 0124208 ger year foreach fe sen ear 8 ionewsime fra3218000 near 7 © ‘ay anguntbaween Sy ore yer bride he sum ot feseven cash tows ‘es Sous, . S219 00% vear na 83 er Yrs 2 Brough . $2022 1a per year foreach ofa ven stand riety cus the avanages art Adsasvanages of mera rate etn ‘ies, ‘Span the ciferences and silat tween etpresen vue (NPV) and he poe inaex {Gen the goal of masinizaton fm vaue are Isporance of ne present valve (NPV) nd yt inary franca ection makers at soe of he Use idee dsiabe messes such athe Beyback mete. Why d your hs is tbe ‘ro ee ris ao be a speci case ofthe NPV: Expl hy hens arty IRR Mot nai expe wl ge tat et pretet ‘elu he best canal bageing nao ‘Spin why ths eg ed lo enplen how even NOV canbe urate en poecing Boje sue Chapter 05 Key ‘re aiterene bemcan he preset va of invesmerts fn enh fos end sna cos he A net present vue 1 imemal rate of return © payback paid prota dos discounted payback pro Which sateen concen he ret preset \alue (NPV) ofa investment or feng proesiecarea? A Afrancing projet sou be accepted env tbe NPV ie acy eal o 2 Animenmere projet shoul be accepted ny tbe Nevis eal oe ital oh fo Ay ope of project shal be secepted# F the NV i pestve and ecco es regan 1 Any ype of project wh greet cash intows ana eas otows, shoul Sayabe accor i Animesters poet hat has postive ish Sons for vey tne peed ater he Ines meena soul be aocetee ‘The lng of ie reuite fran invest gore cash Rows sucirtfecver ne ‘il oar ne neestmer eal! A extn pefe ' networking capt peo, payback pero 1 prottaity index dlscounas payback pr PES ‘An vesiments accept the payback pevas A ites nse snd it 3 bute ee of ester, & tea © lesgaooc pen tun son Spettis pera of ne. Seq, and ait gust te Invesmanisie ‘rela of tie requles tr apes scouted cash ft to eal eal cost ot ‘he prentiseled he 2 discounted et resent at © payback pai 1 elscoures profi index E scoured payback aig ‘pe discounted payback estates that you ‘Seu accept an meson project as ‘iscouned aaah pena 1 exceccs some pe spect etd aftr 2 ie postive and ejected tas nagnve ists nan the payback ord D istess han some pe-sptited pee of “© exceeds te ie of the investment. ‘The count ate that ates he nt reset (lust an invesment exacy equal ers ‘alecthe 1 eral cate fret B inernal ate oer & average securing re, profit, equa iano poo econ Ri 1 eva equal tra presen value (NPV) i exactyeauato 210 © rear an ne zou ae 2 lees than he dsount re © negative, ‘The passnity tet mare han oe cone ate las the NV ofan meas eal a {er presenthe proba ered oa 1 pet present vue profing 2 operon ambi the munsay excuse imesiene decison, 1 issue of eal rutile rates of eur, Fry [A siuson in which accoping oe investnere revs he accenace of ante inveserent tame net present vue proie 13 operational anbiniy decision, {& maualyoxtsve inesimert decison 1b issues of scale problem, muti rats of eu dein ‘he presen value ofan ivesment re cash ons ded by be al cst ofthe vest 1 netoreser vale is ital ae fer © average securing ren. Bprotiahity dos profie period An independent investments accept ihe etsy nex othe ester 1 greater an oe “8 tess than one. © gyeaer an te tra ate ot en, pte an pe-speteraeo rta lees constant. et resent vate ot Spee! invest poe ereases wen the discount te cresaes 1b each ea now i dete by one yar then cost projet neeases, B the ato otro decreases alleash inflows occur during the last year instead of ponoccaly tweuprouta projenrs ie ‘The primary reason that company soe with ose net resent vues oe coriered ‘sored he | they crest vlue forthe onars fh fm, 3 the peas rane of eum enced te rte ote thay eur heal ash cay wo thre yearortess 0 ered cs tos ect et i thevesment cost encode the present aprget has et peser aie 2 A the in costot he pret ceeds ne Dresantvalue of he poets subsea lah Sons 1 the eral ae oem encoese se ‘scours © the pret peduces cash nfows hat freee the smu reared non ay clay nvocating he rected ash ows alloc te peers NPV © be aoa © Mp etn nt reeds rate Netoresen vale ‘canto used when decisngDenoen to Frau exsve poles. 18 mre usu nar he alate of Feta en corp cree sed project Ferrey ses by smal ms accoring the iaham and ancy sey ' leet as idly eed n pace as payback fant docourted payback 1 senres ne ner pee s, Peybsckiatequenty wad toanaize Independere projets becuse | Reonsdars the ine value money, © allreevart cach fovea neuded inte fanaa. 6 its enya quik cal frayed eect tenet tases bate cecsonsthan hase nade usng cher NPV oF RR ‘ne characte othe payback method ret analyse © standard cut point for cash fow © > bin sad iii. 1 cansiertion of rik eel af ach praeee Asoounerg ofl cash tous a8 Al ese equal he paybck peti fr a prj il decrease whenever tte i rere tenor a proectinerenses, C assigned scour rate Socrases. 1 cash tous are moves gare in tne E duration ofa jt i engrees ‘re discounted payback arid a a project it A discount te ae tthe orice Ineeaced 1 ini cash outay ofthe project ineeased 6 tie pred ofthe poets ness 1 amount ot een proc ea ino is > inreaea prjeinrense “The iaeouned payback re yeas rizr with discounted payback sos in ices fe rojas tet be sazented ' the most aus poss to bereece in fever fas iw pete © projects tobe mcorectysccoped be 0 {ereing the te vue many 1 soe poets wth nena et resere Values tobe scene [Sime poate et present value projec te Bereoced, For investment goes, th eral te of ‘oun gre ue ndatessccetae ofan investment Bist rare gears sally by he cash 2 one of he ivesimert 2 fauoed primary ork poe ayn 1 fate rt tht cause ent reser ut fa projets aul the pects ial os, cqnefecrey be usedto compare allupes storoens “tral at of eu ora proc imeem 2 tg icon tn st on be 1s the ttl amount ofthe eshinflows ‘seed tech cath nw a aves uch tie teers one year lter has aialiy proesed 1 there at of xu rece i the scour te sneroase, “Tier te of et A ore rable a a decision making tol {Tanne pressrerlue never Youse ansceng tal excuste paces fuvalem tome dicaur re tet makes tho netpresent value eau one campueusng 8 pret cash Nos at the ony sauce os. (ependont onthe ores ees ofeedn ‘ermaricrance ‘oto methodology han netpresont ‘alueen ding cacanversans hohe ease for managers to conpreend than «the net present vai is enemy accurate even when cash ow aunate we au, & sgnreby mst anc managers 1 used armani to iterereae between ray exten projec Uolgedn projet aratsis ony when Inlet preset aes So ‘ou se wyng determine whether t accent Project Aor Proje 8: These projects oe Imutuly excuse. As pat yur sas, you hell coma ener IRR BP Geermning he cscharoes is netpresent vale o each pict shane ‘tera of vere a hs cout te © heoune rte tt i lacuna tht makes tere present ‘ae each ast ual ane. £ Interna rat ofr othe arenes in ‘hecash noes che wo po a. Comparing te NBW profi o an invesnert Sree otha of fmreing pee omonaeats wy be | recemana i vas wi ceges inthe Irae at ofierest In asain ul for ves poeta ie 2 te poate othe re er faring prea €e'san ot projec ations he decison as touhin projet seep i> Nev tae for arcing proce ihe pponte fe ue er nvesrent pects praia ee abe set renee vloe ‘re vl How shoul prota index of 260 be inorveta? 1 The present vale of the cashflows subsequent tothe rita casn row i Saat to (ox Intl cash tow). 9 Te pues aieral ae een { Tmepraect proaices art ncome of r9 ferereryyer ots 1 The projer ash flows ubseouen > rel ash ow have @presont vaso! Troprcjecalso nas anet present vate of 2 ‘The profi inde: | ula tn aus deisone atone. ‘the dain basco nents valve ne £2 [6 uct a. deccion nl when invesnert 1 fads ae need ana vane ind re © mates most commen usd when ‘Teun beeen ad ese 2 prensovayag xe fue adios fore prj sie when Setemring wish ane afte poets to aecer reduces ecu wien scaly are sk {ecomprchond you wart review arias tom a bene cs perspete you sold use De ‘etod of analy. 3 payback & imernal te ore scoured payback Ero ndox Which one of he fotouing ne best example oft mutual excepts? planing to ul a warehouse and ea tute coe by see 1 bing sate equipment a menufactre both aes ad char smtaecusl entny uta company warehouse Sling © frewte 1 using company sles xc promos fee oooh Svs and soos i bing oth inemay ar ed asets ‘ng und fom the some Sano Prieta isopering a bakery 10 Ceres ‘Steet Projets opening eepacly coer ‘top erne same sabese Bat proses have “hubrvecal hows that Bah pees ave poate nd nga cash ws tocar {btoving ein imezmere When sig lec wn prowetesecpt, gen nt Snag accept eer you shel ey mest envy onthe method ofan, profit nox is intl ae err © payback 1 netpresentvaue cisco payback ‘Mars anazing wo maualyexcsive projes (sear sue, Bon jes have Sear Wes Pigecta hs an nV of Sin, «Payback ord of 23 years an FoF 15 9 peream. Sno deount ae of 130 perce Proje 8 as ah NPV of 19,78, a pyoack pen cl 28 yeas arr oF 18 perent or 8 ‘ina ether roe. tut notbo, Ma shou 1 Protec fs tack er ® arpa ase bohe pontive € Propet tad ota Nv 1 prt aecne fe nether psec based onthe RRS tation is mor concerned about the ae ‘etumof salient han tis out the hour ofvalue cee hen fs est Soto evaluates capt rect using the anon tana eral at teen © moi itr at ot tn ° payback proiaity index No mane how many toms eines anaes ou omer | heat ross fom argc may vary = Sanicaty forthe expected resis is telmernal rate turn it aye rede he moa isle esa projec wil raverbe seca ness ine Davao prs is mot 1 Met cant wl gery ry Canscertly fom te eatried o=t, E yh rat ee year fe poet vet ‘ita find oucome nich ofthe fotloving metodo rect Shaves are sod wards shonsorm projets? prota index and rea ae of oun + scoune paybeck ad payback © net pase valu a payback 1 payback ne pretty nex prota ndox ae lsoured payback H aprcets assigned required ate ot xn | he sng of he proers cash fowshas no ® beating on valu oe projet ib he pret aay be acted © the por wl away be elect © peter the poets accepted or reeced ‘depend onthe tring ofthe cas ews E the peor can sever ad au forthe ‘Siero {You ae considering a proect with he {olin dat: ternal rat of ret 87% Prontapity rato 80 Net presen valve ~ 5595 Payance period? years Required fetur 8 5% neh one ofthe flloning is Cowrecr given this ntormation? 1 Te dscomid payback ped val have to oless nan 2 years rata ras wes eal ee eral Tis rat shouldbe screped bases on the prota. E Thaproee shoud be jected sed on thevmcra at fen Aeceping a pote net present value (NPV) brace, Indicates epee wl payback win be ‘te pra af ne 1 means te poset vale of he opeced (ich Bows eaal tothe jects cost fences abaret ik wah the jet 1 guaarees al cash ow asurgtons ul Bereaioee E ‘Senet to icrease te tackler Fale be emer he NEW ‘he net rest value method cape Seguin sai does a fhe allwing | tecorgoate een he analy. is conifer al rsevantcash ow ntston © use a ot projets cash ous. 1 discount a recat ors, Ernie a specie antes rate ofan ‘The pyback method af rai © larres nl cost, © alvaysuses all pect cash fows 1 ages an indus sanded reovement Doron. has atining bas. 2 Why do managers sggesthaignrng alles ons loving the ase payback pedis ‘otamao fe fe payback eto of ‘al buding aaa? Payoack a nver usenet paccs 20 rakes no tevenes how seeders ep) themenoginher uses © Alcash ove aerhe est a years are ‘phy necro nln tr essen theresa of he suing detson ithe cash tons ar he rutes payee tos re sifean, menegars use ir estreson ovr the pyc 1 lca wa asthe asignd pnback Pod sr eliney wore in oaty's Sots co norma hem has no The rests finusng te cash ows ater the regu payee pote rey hate fay efecto he accept edsion ‘re payback meted 1 eine at taquanly used method ot apie! badpesa ans. 1 tee mare saphiesed method of analyse thanhe prota den © conser the tmovalv of money. spptes aint peace where the ea ‘Ele wate Laser ey soon ‘ener acute deca tat conten tithe decion suggested by WV snahei. ‘he dacounted payback mato A caniders hese vale of money '5 discounts the cut pint © disor tei co. D iepectenedtathe NPV nevos larres poet ks ‘The pytack meta A deren act cnt oho pr fsecepea jhe nev ne ile accepted” bythe peybock prod ue 8 derrmnes cao pit us te paint Were als capa inveserents have een depend {requires anerlvay choice of acutoh 1 vere he at pre wih he mere te frwerest. ferry ued acl peste “te mote ena eteo et le sed asthe ceca ate ors NPV Calealstone 1 Sep ony peony caer © inti mah scent scons ‘thera sour a be sage. 1b compute ty coming cash Bos ei 1 ony one charge inaign remains F assumes a poets we ancing ens A may excsve proc is projec whose 1 acceptance oration has no eect on 15 NeV balay neste tris aaays cepa 1 acceptance e reecion ates ater projec ah aw pane ents mor than ane Sarena “To fatal ao he tea ate on desl re he ativan ceterminaion of dione te #8 5. ‘ipendres fd tere crecy anaemia rchsheinvesmer ome fd the mute rate fret grb. 1 fare conse tal eens fale corey analyze muy cust invesrer recs fale conc analyze muy lichsheinveamer procs andthe ‘itera of een rion A iat a ave roe than one IRR, ary oat me A iar IRR is postive 8 rimary RR is neat neviezer, 1 cash ow parom exits morehan one Sermon Ganon pant eis ena ae sigs sng ira a fen mead ‘enverdenal nese projet shoul be ‘sezeted he eral ate fe 1 equaltothe dsoaure ao B preter nan he nun tess than the discount rate eave E postive ‘Teer at of eum or anise projects best dfned as ho [A dscourt aon causes the NPVe equ ‘5 diterence between the market rate at Interest andthe decont a, 1 minima projet zceparce ae sty management i manimum ate hatcan be eae fora Projecto be screed ‘he lemons hat cause pobems wih fe use tbe PR projects tht are unuy ce 1 acne ear sole robles. © tining ad sale poems © discount rete and tring problems 1 seal and reversing flow probes fining ad covering Hw arabes Assume you use all aalele mths 0 fvchate proces hers contin he ‘nessa deison tates mo uty nce projects de to he Dae A accept ba picts since bothare Stceptatle based n some melo ' combine bt jets ro one ager prec {loro ie RR act ne ecsion Inscmed by he NPV metas '> bare the ial decal onthe payback rer bath pj du ambiguity inthe Gocson making process ‘The pti index of animvesinent jet it thereto oe average netincome tothe eerae i ineral ate of tun the cent mara ‘ae of erest © net gaset valu fh sjetseaah Cutlows cides bye ret esr ae of ‘eimons 1 et present value of ever projet cash fow EE presantvae ofthe Tie 1a sbsoquert Gaenfonstorns inna oat. Which neo he folowing statemerts ise? 1A You must ih zoe rete to Campue te NPV btyou can conure he TR honing a dicot ae, 15 You muse have edacout rae coment NOVIIRR land doors abc, Payback uses We same daca ‘atappiedin he NPV cation 0 aig recs an yee one Dacor payoak baer meta than payoad an ismore eves sed Graham and taney 2001 fund tat. wef tea not pl aa bas IRR and payback BRR and nev E discoumad payback ard NPV ati te et reer value of pee th ‘hn oa of 26 600s ease $12unp $21 600. ana $0 00 fr vears 13, ‘especialy? The deat ees 18 perce 3207.22 81,195.12 Hs138049 sror22 Wats the et rsent value a pojectihat sania cash culo ots 27 anc easy a e ‘27038 c $08.20 e serio ‘A pleat coming $6,200 ial shou rosuce bh eons 082.800 ayer or tee oar Der he dee yrs the pet be shut fiw an ws sl rns ang oF Ye tran ‘exmated nat eas amount of $8200 Whats Senet present abe othe project ine ‘eauted a of eur spercen? s2ara76 sou 1920.02 se si mma ea tt ne Seeeireieeiteoret oe Shean des iret Siac dteis atta Sena aeetarh Sonia ecaeasse seed tienecccmneen ee ee aes eae Proje NPVs negate Broa tein hese ober Projet because t has the lags oa xan 1 Projet 6 because thas a nega NPY ‘hanes acepance i nether prec. because other has an evel or pester nen ina cost | Prat because i NPV pve ile ® ‘un Lee's casideing tno mul excueve pede hat have heen aegrad ene ‘Gscoun rae of 08 peeent Projects 2 Ii coe Sea S00 ana should proquen cacy ‘lows of $15,403, £0500, and $1.70 for ‘Years 1. rspecive Pijet Basan iil om of 7960 and shot produe cash los of 8, 8-30, rv 342100, Yor 1 (BS. repectvey Wnari heineemenal RR? a 18.40% ib -1129% Bernstein's proposed project ras an iiat, oat of $128,600 and cash flows of S64.S00, $99,500 and $15,500 for Years To's respectively alinegative cash fows are moved to Time 0 at a discount fae of 10 percent wa te modiied Lusi eviing a rie wth an ete cost of 338,70 and eaah inflows 89200, 26.800, {521 700fo Yer 1103, repostely ‘Should the projactbe accept ft ha ben assed a eure rou of 0.75 paren Why | yess because he RR exceeds the reared urn by 38 prcers is yes: becuse ro mses than the ‘gerard by 20 peer © yes: because re RRs exes he Fauld eur by 46 peer 1 na because he RR exes he requited Furry 43 percent i na been the son 9.89 peoent ‘ore conden mo independent rojas ‘sth he same cz ott pores Drjer costs $284 700 ana has eas ove of Stesog, ios 00. and $189.00 ar Yate 5 espedive Project 8 coms S115000 and aga eas oo 80000 yor Yes 1 10 3ouravesutcers nos a france ay Geaeionyournane When projet oF eect (Ser shuld you asses ny? 1 Proiet because he the ler NPY B Project because ts RR enced the © ath pcos: because ter NPVs we bth poste 1 Project because tis the lrger sed projet nth pasive RR nether prec because ter NPVs ae (eee tnan hr inca cons ‘ve Bird Café is corsaerng a project with nit cout of $46 800, and cash Roms. {f g8.500, $25,000, $19,000, ana ~ $4500 Torvears ito 4, respectively. How many Internal rates of returs de You expect 2s projec to nave? a on o's Welding prea cash os of $13,500, ‘$2000, and 42900 0 Yeas toda proce vin inal 2s of $5 00, Wat Seta re gre an ined dase e o E us os Flower asa ie costing $40.00 and (28 fows of Se s00 15.600, na $22 TODTor ‘Yeats 3 respecivey Based on te Prteatiy iene shold be pet be Screed ine dicount rms 8 pce? ‘Yessbecause he Pie 1.02 ‘Yes because he Pie. 96 c ‘Yes because he Pis negative No: because PIs 105 No:because ne Ps. 95 70 Ange’ eoridering mindenender prject= then 2a bes oth pects fave toon ‘aed a coun rat of 5 param She has SSSSzn feo ance one Sb preset Drjet a conte $2800 snd has cash os of 5104400 and $28 700 for Years La 2, ‘spec Projet cus S61 000, ae has (Soh ows of 26000 spa $2200 overs '.cegpecarey, Which praetor poe ‘Sino shuld you sozeat based on he rotesbity dex matod end whet sth covet Secon raed? 1. You hau secepe bath projet since Bah ofr ve postive Figher Bl anéyou an ony sale one { ou shoul ateg bot projets sins both others ar rete han 1b Yor sha any ena project sce & hese argent PF andthe exceeds one Noiner projet accel Te, aproect managey wants tainesiaa role whan ial soso 68500 andcash Sos of $3200 and $08 S00 in Years ad. oto, bss eaures a cau at of 10 Dower nda seson at $3.10 nosy otro every Sores Wl eget 2 ‘rec eopowea? Why ory 00 | yessbecause the NPVs patie ibys; becuse te Ps get than 1 © yee: because bat eri are met 1 ng, Because th roe oes nat mest ther requrement ne, whle tho project rts move than 10 Bear oes met 1.10 post iyi cot $3.00 to au a alice ream cat Cr sales are expected be 1.400 4 ear tor vee yous. Aer ne ee years the Garis eqectd be wortessas het the ‘ipestedemaring Me af the oaiog stm, Whats to paybeck peed theo tear 1 asco © reayeus D 214yeus E 289 yeers ‘Yous consdeing a poet win anni ost F300 hare pays peso othe praestifna each stows we S950, $370. $2100 end 8800 a you for oars fo, ‘especie? 2oayeas 209 yea ‘A poecthas ann ost ot 82250. The cash Infos ar 8,850, $900, 2 8700 Years 2 oi respecely Whar ire payback pen? A 2o7yeas 8 2eeyews © asayeus E never Fe i ” 4 {ek caniderng sina tote genes ‘Sore Hessimates ne cox ny an wl i 54.200, The remadelng end sheng oss reese a $1200 Toy aes are expected ‘3 troovon net anna ese eo S150, esr respec Saul eck a yates Imarchand ie eaultes a eevee aback Dota? Wy or wy na? 1 yes because he payback paid 2.98 feo 1 Yes, because the payback prods 202 yor © Yes, because he payback pried 80 years 1 Re, Becsuse th payback peas 202 ves fo, because he payback ptiod 820, years ‘A pista an iti ene $10,600 and (duces cash ino of $3,700,500 and 2500 fr vars 110 3 repectvely What ite Seeoonedpiackpetadte enue el A 265 yeu 8 a7ayews © 2sayeus E never Homers cansiosing proj with ash ints of 360 yeartor Verso respecte. The Droecthas a equre dacun ate ott erat rd anal ost of 2900 What ithe ‘Escounted pybeck poe? B 2c0yeus © azoyeus 2ztyeas i never Ginny is considering an investment costing $55,000 hat has easn fm oF $35,000 n Year 2,438,000 hs Year and S8'000ln Year. inty requires a fate of ‘etuin of 8 percent and has 8 required “scountee peybock period of three years Bese on te dacountes payback tod fhings conedered, do you ngree wis this ‘eciion? Why or why not? | yet because he NEV stive athe Droies pa back on edaceuied bass ‘in the essigred Ue prod 2 yes: bt ony because he ozourted Bbc equrerereis met n,athough he projet etre more han 8 peter eres roshuson where the res can pay back on a scoured basis ‘iene yrs 0 fect he com pbs pee Yes scoured payback inate 5 Seceptane bt ate aie econ Sitka NPV fenapatve and he Fal ens Suton roved by savback Prjat conte $4500 and ha cash ow of ‘Siz'00, 6 00, and 60000 frees 1 ‘espechiay Projet a hes an al cost ot $73.00 andhes cas fors of 390000, ‘ospecaively. What is the inaremental IRR of ‘Sele orormnaly excuse pees? sane -1491% 16.75% 20.39% Prjct a anal ost of 875000 snd ‘cash hans of 822,000 poss relat 8 costs 80000 and has cash fos of 'S25:00, $90.00, ena $25 000 fr Yewrs 9, ‘espechiay rojas Aare Bare mal) reise, Teineemertal IR and 1 te requred ate sighs ea te Over (aistienProject soul be accepted, 26m 0068 e 1565164 SEES ‘A proposed new verre wil os $175,000 and ‘Sout eroaucearual cash tos of $28.50, 'Ses.00 a0 00, and 0,001 Yeas to, ‘espestiay The faquved pybock pesod and ‘iscoute pybest peau 3 years. The Giscoun rates 9 percent. which mets ‘neue nojet aaeptnce md wnch rene proestrecrson? cet: NPW IRR, Pl pavback rec ‘iecouea pba seca: NEV IRR, Pt: aye, ‘iscoumed pyback seca pyc, Ph eee NPV. RR, Siscouted peyback scze payback leenuted payback ect NOUR scze NOV IRR cP, payback, ‘scoured paybac | finencng project hos an into cash tnfiow of 82,900 and cash flows ot = $15,000, $92,200, and 3161000 for Neais to 3 respectively The feauited Inte of return 13 percent. What =the Incenal rate ot rzurn? Should he project, Beaccentea? 1 1526 accent, 15260 rit 13.4006; ejeot 13. accent soe acco Don Under Stores is consdering an investment with an intl cos of $2000" neon, the project wt ‘eauire an aedonal investment finally, te project wil be shut gown in ‘oor? The annual cash ons for Years 2 {27 respectively, ae projects 9s ‘64/000, $87,000, 91.000, $45 00, $122,000, $154,000, and ~'$30,000, Mall fegative cash ows are movea to Time Rg alscoune ate of 13 percent what Sine project's moaned BA? A asa is arr assem Peja Xa a iit cot $20,000 ad @ aeh ew of 25 O00in Year 3 Project oat $20,700 andhascash ows of 812000, ‘especialy The decanter nd ‘Reprjens ae munaly excuse. Based on Shehavidua proper sou sou accep Prec based on HPV you soul crept, Project ie nl een Sad et ib wxix ‘You gr considering mo indepondent projets ‘hat ave feng enuramarts: Project ras ‘ee oun af 22 pecan corpora to Dele read eum of 35 poor Drjet costs £75000 and he cash os of 521000, $48,000, ana 2000 or ves 12 ‘Bepectvly Projet has ancl cost ot $7000 andeash ows oF 15000 $18.00, fa e100 or Years 110 9. eapectray. Given SS inomaton youshau A accent bth Peeer Aan Prose 6 cept PoecrAand ject Project. sccep Project B and pct Projet rete borh Proje Aa Proj 8 accep ticheve ane you wart but nt to eee “uo muna exclusive projets have 3.year Ihe anda rege rate oot of 108 Deven Proje ose S15 600 an has cash ‘ong sis'soo, saz so, ana $20.50 oe Years 3 respecivey Pret B costs $72,000 andhas ca fos o 822000, respecively. Using te IRR, which proctor rome eter Shu be arcs? 1 acceptboh poets 3 see ere poet as heres no Shnicann ference betes eh sccpt Prec ad jet Pree. 1 scent PreeeBand ree Prt E reeerbath preects Leste charged wih determining wich small frgecsshoul be nde. lang wah mene ae ha boon ranted he use of $is.00 fora maumum of vo yen. Se rsdeing ee proacs. Breeet costs ‘$7Smn and hae eaah hows of 000 aye or ‘oars 1 3 Progct 8 coss $8 00 andhas Fears i 5 apache Prien Ecos {3200 and ae cath now of 2500 n Year itn decane sou she ake regen. hase preectsIse ass hema anon ‘Sscoun ate of 5 pecan? Expl why SE kterativccsnces ee” ineicenrnenana fb secept reac Cad jc Pract Aan Bibcense ory Projct ha ecco payback mats eos hanover cept Prec And © und rece Project Bastney hve te sronest scan Psbe pero tha tn he $5,000 aceept BojecsAand ¢andrger Project Bish and payockutn year i cee Baecs ana a ee Poeet, ‘ast conbiatin sce he moet sa! han is considering wo ndopendent eects. reer conte $76 500 a each owe ot ‘SIeTo0, ae 00, ar 2.200 freer 12, ‘espeatiey Projet cos 70000 sr has (22h Rows of 810.800, 815.800, and 887900 fr ‘ear 3 respecive Juan esagns a

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