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34kurt
3 years ago
11

You are considering two mutually exclusive projects. Project A has cash flows of −$72,000, $21,400, $22,900, and $56,300 for Yea

rs 0 to 3, respectively. Project B has cash flows of −$81,000, $20,100, $22,200, and $74,800 for Years 0 to 3, respectively. Both projects have a required 2.5-year payback period. Should you accept or reject these projects based on payback analysis?
Business
1 answer:
gladu [14]3 years ago
5 0

Answer:

Choose Project A whose payback is 2.492 years and therefore falls within the 2.5 year required payback period.

Explanation:

Project A    

Year   Cash-flow   Balance

0    (72,000)    (72,000)

1    21,400     (50,600)

2    22,900     (27,700)

3    56,300     28,600  

Payback = YearsWithNegativeCumulativeCashflowBalance + \frac{-LastNegativeBalance}{CashInflowfollowingYear}


= 2years + \frac{-(-27,700}{56300}=2.492 years

Project B      

Year  Cash-flow          Balance  

0    (81,000)    (81,000)

1    20,100     (60,900)

2    22,200     (38,700)

3    74,800     36,100  

Payback = YearsWithNegativeCumulativeCashflowBalance + \frac{-LastNegativeBalance}{CashInflowfollowingYear}


= 2years + \frac{-(-38,700}{74,800}=2.517 years

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C- Sale of land for cash.

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Since, cash would be generated from the sale, and it would be invested in buying something else like stocks or an asset, It would be included in the portion of investing activity in the cash flow statement.

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Matt Shaw buys 100 shares of common stock for $8,000 in January. The value of the stock fluctuates in a narrow range (averaging
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Non-profit entity would record its assets at fair value same as assets are recorded by other entities.

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What is the difference between a commercial bank and a savings bank
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A combination of high crude oil prices and government subsidies for ethanol have led to a sharp increase in the demand for corn
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Answer:

a) Increase

b) Increase

c) Increase

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e) Increase

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a) The price of corn

The increase in the demand for corn will cause an increase in the price of corn

b) The quantity of corn supplied

The quantity of corn supplied will increase rapidly in the short run before equilibrium will be established in the market

c) The cost of producing soybeans and wheat crops will Increase due to the High demand for corn hence the supply will decrease as well

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3 years ago
Project A has a required return on 9.2 percent and cash flows of −$87,000, $32,600, $35,900, and $43,400 for Years 0 to 3, respe
LiRa [457]

Answer:

Accept Project B , Reject Project A

Explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be found using a financial calculator

For project A ,

Cash flow in year 0 = $-87,000

Cash flow in year 1 = $32,600

Cash floe in year 2 = $35,900

Cash floe in year 3 = $43,400

I = 9.2%

NPV = $6,288.17

For project B,

Cash flow in year zero = −$85,000

Cash flow in year 1 = $14,700

Cash flow in year 2 = $21,200

Cash flow in year 3 = $89,800

I = 12.7%

NPV = $7,468.93

Based on the NPV, the second project would be chosen because it has a higher NPV.

Both projects are profitable but because the projects are mutually exclusive, only the more profitable project can be chosen.

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

5 0
3 years ago
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