The disadvantages of the simple payback approach

Assignment Help Financial Management

Reference no: EM132058772

1. The disadvantages of the simple payback approach include:

cash flows after the payback period are ignored in the calculation

payback ignores the time value of money

payback fails to provide an objective decision-making criterion

all of the above

2. A project requires a net investment of $500,000. It has a profitability index of 1.5 based on the firm's 12 percent cost of capital. Determine the net present value of the project.

$ 250,000

$ 562,500

$1,012,500

$ 140,625

Reference no: EM132058772

Questions Cloud

Company has arranged revolving credit agreement : Your company has arranged a revolving credit agreement for up to $78 million at an interest rate of 1.47 percent per quarter.

The firm level of investment in working capital : Which of the following major factors affect the firm's level of investment in working capital?

What is the company cost of common equity : What is the company's cost of common equity if all of its equity comes from retained earnings?

Only debt and common equity : Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity?

The disadvantages of the simple payback approach : The disadvantages of the simple payback approach include:

Cost of common equity and wacc : Palencia Paints Corporation has a target capital structure of 30% debt and 70% common equity, with no preferred stock.

Determine the project annual net cash flows : Annual depreciation from the project is $30,000 and the firm's tax rate is 40 percent. Determine the project's annual net cash flows. $48,000

Bond value does the repayment of the principle represent : what percent of the total bond value does the repayment of the principle represent.

What is the firm cost of common equity : Assuming that the cost of capital is 12 percent what is the MIRR for the project? What is the firm’s cost of common equity?

User Account

All Pages