1 answer

Assignment 11 - The Basics of Capital Budgeting Back to Assignment Attempts: Atention: Due to a...

Question:

Assignment 11 - The Basics of Capital Budgeting Back to Assignment Attempts: Atention: Due to a bug in Google Chrome, not tun Keep the Highest: /16 e, this page may not function correctly. Click here to learn more. 7. The payback period The payback method helps firms establish and identfy a maximum a capital budgeting decisions acceptable payback period that helps in their Consider the case of Fuzzy Button Clothing Company: Fuzzy Button Clothing Company is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Alphas expected future cash flows. To answer this question Fuzzy Buttons CFO has asked that you compute the projects payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the projects conventional payback period. For full credit, complete the entire table Year O Year 1 Year 2 $5,100,000 Year 3 Expected cash flow Cumulative cash flow -6,000,000 $2,400,000 $2,100, coo Conventional payback period: The conventional payback period ignores the time value of money, and this concerns Fuzzy Buttons CFO. He has now asked you to compute Alphas discounted payback period, assuming the company has a 9%cost or capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to the nearest two decimal places. For full credit, complete the entire table. Year o Year 1 Year 2 Year 3 Cash flow Discounted cash flow Cumulative discounted cash flow[ -6,000,000 $2,400,000 $5,100,000$2,100,000 Discounted payback period:
media%2F45d%2F45d1b782-ccb0-454a-83b4-cd
Assignment 11 - The Basics of Capital Budgeting Back to Assignment Attempts: Atention: Due to a bug in Google Chrome, not tun Keep the Highest: /16 e, this page may not function correctly. Click here to learn more. 7. The payback period The payback method helps firms establish and identfy a maximum a capital budgeting decisions acceptable payback period that helps in their Consider the case of Fuzzy Button Clothing Company: Fuzzy Button Clothing Company is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Alpha's expected future cash flows. To answer this question Fuzzy Button's CFO has asked that you compute the project's payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table Year O Year 1 Year 2 $5,100,000 Year 3 Expected cash flow Cumulative cash flow -6,000,000 $2,400,000 $2,100, coo Conventional payback period: The conventional payback period ignores the time value of money, and this concerns Fuzzy Button's CFO. He has now asked you to compute Alpha's discounted payback period, assuming the company has a 9%cost or capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to the nearest two decimal places. For full credit, complete the entire table. Year o Year 1 Year 2 Year 3 Cash flow Discounted cash flow Cumulative discounted cash flow[ -6,000,000 $2,400,000 $5,100,000$2,100,000 Discounted payback period:

Answers

C38 f+C37+B38 Project Discounted payback PVIF Project Simple payback 35 Year Cashflows Cumulative cashflows Cashflows Present value Cumulative cashflows 0$ (6,000,000) 1 $ 2,400,000 $ 2 $ 5,100,000 S 3$ 2,100,000 $ $ (6,000,000) 3,600,000)$2,400,000 1,500,000 $ 5,100,000 3,600,000$ 2,100,000 1.000 $ (6,000,000 0.917 $ 2,201,835$ 0.842 $ 4,292,568 $ 0.772 $ 1,621,585 S 3,798,165 494,403 2,115,988 38 39 40 41 Conventional payback 1.71 Years 1+3600000/5100000 43 45 Discounted payback 46 47 48 49 Discounted payback has theoritical superiority as it considers time value of money. 50 51 Discounted payback method failed to recognise $2,115,988 1.88 Years 1+3798165/4292568

.

Similar Solved Questions

1 answer
Unearned revenue: Group of answer choices has a normal balance of a debit is found in...
Unearned revenue: Group of answer choices has a normal balance of a debit is found in the liability section of the balance sheet represents cash owed by the company to its suppliers two of the above choices are correct all of the above choices are correct none of the above choices are correct...
1 answer
A 30.0 g sample of krypton has a temperature of 26 ∘ C at 585 mmHg...
A 30.0 g sample of krypton has a temperature of 26 ∘ C at 585 mmHg What is the volume, in milliliters, of the krypton gas?...
1 answer
Name Pret 017, f its 10% preferred stock, and cash of S62.00) cquisition date, Pretzel Company...
Name Pret 017, f its 10% preferred stock, and cash of S62.00) cquisition date, Pretzel Company stock had the following characteristics: zel Company acquired the assets and assumed the liabilities of Salt Company on January 2. As compensation, Pretzel Company gave 30,000 shares of its common stock, 1...
1 answer
FORUM DESCRIPTION Anne Marie, the owner of Anne's Beauty Salon, comes to see you again. She...
FORUM DESCRIPTION Anne Marie, the owner of Anne's Beauty Salon, comes to see you again. She tells you that she has one more question for you. She told you that her accountant tried to explain to her the closing process in the accounting cycle. The more he talked, the more confusing it got. How w...
1 answer
I am having trouble with this question if anyone could help that would be great! CH...
i am having trouble with this question if anyone could help that would be great! CH 06 HW t Percent Yield 3 of 7 Constants Periodic Table The Haber-Bosch process is a very important industrial process. In the Haber- Bosch process, hydrogen gas reacts with nitrogen gas to produce ammonia according to...
1 answer
Are Bitcoins a Form of Money. Share your thoughts. 120 words minimum.
Are Bitcoins a Form of Money. Share your thoughts. 120 words minimum....
1 answer
Explain how a "cap and trade" system works. What are its virtues and drawbacks?
Explain how a "cap and trade" system works. What are its virtues and drawbacks?...
1 answer
How do you find the quotient of #(2h^3+8h^2-3h-12)div(h+4)#?
How do you find the quotient of #(2h^3+8h^2-3h-12)div(h+4)#?...
1 answer
In my class we are being asked to post responses to questions others have answered. Below...
In my class we are being asked to post responses to questions others have answered. Below is the what I need to respond to. Any help you can give me would be appreciated. I am also being required to post a reference with this so if you could help with a reference that would be great. Thank you so mu...
1 answer
You are working with an ornamental fish that shows two color phenotypes, red or blue. The...
You are working with an ornamental fish that shows two color phenotypes, red or blue. The color is controlled by a single gene. These fish are hermaphrodites-meaning they can either (1) self-fertilize or (2) mate with another fish. You have three fish: fish 1, fish 2, and fish 3. While working furth...
1 answer
Need help with #2 & #3 January 19, 2018 This homeworksheet is due in class on...
need help with #2 & #3 January 19, 2018 This homeworksheet is due in class on Wednesday, January 24. The problems are similar to problems from your textbook Question: 23 Points: Score: 4 4 24 16 oximate the solution to the given 1. (16 points) Use Euler's Method with the given step size Ar t...
1 answer
MVP, Inc., has produced rodeo supplies for over 20 years. The company currently has a debt-equity...
MVP, Inc., has produced rodeo supplies for over 20 years. The company currently has a debt-equity ratio of 65 percent and the tax rate is 22 percent. The required return on the firm’s levered equity is 12 percent. The company is planning to expand its production capacity. The equipment to be p...
1 answer
Give example with matrix of how LU decomposition works in image processing with explanation.
Give example with matrix of how LU decomposition works in image processing with explanation....
1 answer
You are creating a portfolio from the following companies: MSFT à β = 1.03 PG à...
You are creating a portfolio from the following companies: MSFT à β = 1.03 PG à β = 0.71 NFLX à β = 1.71 You will invest 35% into PG, 30% in NFLX, and 35% in MSFT. Considering this information, which of the following statements is accurate? portfolio beta is g...
1 answer
As shown in the figure below, seven forces all with magnitude F = 40 N are...
As shown in the figure below, seven forces all with magnitude F = 40 N are applied to an irregularly shaped object. Each force is applied at a different location on the object, indicated by the tail of the arrow; the directions of the forces differ. The distances shown in the diagram have these valu...
1 answer
Three wires are connected at point D, which is located 18 in. below the T-shaped pipe...
Three wires are connected at point D, which is located 18 in. below the T-shaped pipe support ABC. Determine the tension in each wire when a 320-lb cylinder is suspended from point D as shown in the diagram. (Round the final answers to two decimal places.) 24 in 16 in 24 in. 22 1n 22 in 18 in. W lb...
1 answer
All parts 3. Katie likes to paint and sit in the sun. Her utility function is...
all parts 3. Katie likes to paint and sit in the sun. Her utility function is U(B,H)=2BH+6B, where B is the number of paint brushes and H is the number of straw hats. The price of a paint brush is $1 and the price of a hat is $4. Katie has $60 to spend on paint brushes and straw hats. a. Write out K...