Use the payback decision to evaluate this project

Assignment Help Financial Management
Reference no: EM131989762

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half four and a half years, respectively. Use the payback decision to evaluate this project; should it be accepted or rejected? What is the payback period?

Time 0 1 2 3 4 5

Cash Flow -5,000 1,300 1,4000 1,600 1,600 1,100 2,000  

Reference no: EM131989762

Questions Cloud

Market believe will be stock price at end of three years : Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years?
Calculate the price of sixth month european at-the-money put : Calculate the 6 month forward price of the stock. Calculate the price of a 6 month European at-the-money put.
Use the payback decision to evaluate project : Use the payback decision to evaluate this project; should it be accepted or rejected? What is the payback period?
Products probability of the demand occurring rate of return : Demand for the Company's Products Probability of the Demand Occurring Rate of Return If this demand occurs
Use the payback decision to evaluate this project : Use the payback decision to evaluate this project; should it be accepted or rejected? What is the payback period?
The investments will produce the after-tax cash flows : You estimate that the cost of capital is 9% and that the investments will produce the following after-tax cash flows (in millions of dollars):
The initial offering-at what price would the bonds sell : Suppose that 3 years after the initial offering, the interest rates fell to 7%. At what price would the bonds sell?
What is bond current market price : What is the bond's current market price?
Compute the composition of her portfolio and sharpe ratio : A third investor has a volatility target of 15%. Compute the composition of her portfolio, and its Sharpe ratio.

Reviews

Write a Review

Financial Management Questions & Answers

  Portfolio would likely suffer greatest increase in value

If the yield flattened, which portfolio would likely suffer the greatest increase in value/price? (ladder, bullet or barbell)? Explain.

  What are two types of risk that are measured by levered beta

What are the two types of risk that are measured by a levered beta? If you know the unlevered beta, how can you derive the levered beta? Select a real company and use this method to calculate its levered beta.

  What advice you can offer based on equivalent annual costs

Assume that a friend of yours is thinking about buying a new car. Her presently owned car can be sold for $1600 or can provide adequate service for 2 more years at an operating cost of $1500 next year and $1700 the year afterward. Assuming that she w..

  After-tax market rate of return on development investments

The research and development division of a large corporation is considering the purchase of a new tunneling X-ray microscope for $320,125. The projected net benefits from gains in materials engineering is projected to be $127,000 in today’s real doll..

  Stock split-what was last year dividend per share

which represents a 7% increase over last year's pre-split dividend. What was last year's dividend per share?

  Use risk-neutral valuation to value call option

Given the following parameters use risk-neutral valuation to value a call option.

  Experiencing rapid growth

Eggspressions is experiencing rapid growth. The company just paid a dividend of $1.94 and expects dividends to grow at 16% per year for the next 11 years before leveling off at a 4% growth rate into perpetuity. If your minimum required return on the ..

  Calculate the gain or loss on the corporate bond position

The Marcus Corporation plans to issue $5,000,000 of 10-year bonds at par next June, with semiannual interest payments. The company's current cost of debt is 12 percent. Calculate the present value of the corporate bonds if rates increase by 3 percent..

  Prepare a case study

Review the following PDF file ("Swaps That Shoot an Industry"). - Then prepare a case study summarizing your findings.

  Estimated value of operation

EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC=12%. Calculate EMC's estimated value of operation.

  Bond outstanding with coupon rate

Union Local School District has a bond outstanding with a coupon rate of 8.09 percent paid semiannually and 5 year to maturity. The yield to maturity on this bond is 8.92 percent, and the bond has a par value of $5,000. What is the price of the bond?

  Considering project-result in initial aftertax cash savings

Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.71 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. What is the maximum initial cost the co..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd