Purchase Solution

Calculate the payback period

Not what you're looking for?

Ask Custom Question

Simms Manufacturing is considering two alternative investment proposals with the following data:

Proposal X Proposal Y
Investment $620,000 $400,000
Useful life 8 years 8 years
Estimated annual net
cash inflows for 8 years $130,000 $80,000
Residual value $60,000 $0
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%

How long is the payback period for Proposal X?

a. 4.50 years

b. 4.77 years

c. 8 years

d. 10.33 years

Attachments
Purchase this Solution
Solution Preview

(b).
Annual net cash inflow=130,000
For the first four years, the ...

Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • Considering Two Projects: Calculate NPV, IRR, Payback Period

    Calculate the NPVs based on WACCs of 5% and 7%. b. What are the IRRs based on the WACCs? c. Calculate the payback period and discounted payback period. d.

  • Comparison of Capital Budgeting Techniques: The Dilemma at Day-Pro

    Calculate the Payback Period of each project. Explain what argument Tim should make to show that the Payback Period is not appropriate in this case. 2. Calculate the Discounted Payback Period (DPP) using l 0% as the discount rate.

  • EXERCISE 9-14. Calculate the Payback Period

    Calculate the Payback Period The Sunny Valley Wheat Cooperative is considering the construction of a new silo. It will cost $75,000 to construct the silo.Determine the payback period if the expected cash inflows are $15,000 per year.

  • This posting addresses the Payback Period Ratio

    The method to calculate the payback period ratio is: Payback period = investment required / net annual cash flows. This method focuses on recovering the cost of the investment.

  • Project Evaluation Methods

    Calculate the NPVs based on WACCs of 5% and 7% b. What are the IRRs based on the WACCs? c. Calculate the payback period and discounted payback period d.

  • Incremental cash flows

    Please see the attached file for cash flow calculations. Calculate the payback period (P/B) and the net present value (NPV) for the project. Payback period is the time taken to recover the initial investment.

  • Calculate payback period and NPV

    Please see the attached file. The response provides steps to calculate payback period and NPV.

  • Payback period

    The balance $1,000 is recovered in year 3. Time taken to recover 1,000 in year 3 is 1,000/2,000=0.5 Payback period is 2+0.5 = 2.5 years. The solution explains how to calculate the payback period

  • Calculation of Pay back period, Net present value

    Calculate the payback period for each project.

  • Capital project analysis

    Please calculate the modified internal rate of return (two decimals please and per the book)________________________ Please calculate the payback period (two decimals please)________________________ Please calculate the present value payback period

View More Related Solutions