The shop foreman at Santa Barbara Rig Service proposed a portable service unit requiring an initial outlay of $100,000 and providing the following year-end cash flows:
Year 1 2 3 4 5
Cash flow 30000 -50000 70000 60000 50000
At a 10% required return, find the payback period and
Flash Company wants to purchase a new computer that will allow the company to do in-house printing rather than sub-contract the work out to a printer. The machine will cost $45,000. FLash also believes there will be substantial savings on printing costs over the five-year life of the machine.
Savings are anticipated at:
Project SS costs $52,125, its expected net cash flows are $12,000 per year for 8 years, its WACC is 12%.
What is the project's NPV?
Discounted Payback Period?
Assume a $50K investment and the following cash flows for two alternative. Which alternative would you select under the payback method?
Year investment A Investment B
1 $10,000 $20,000
2 11,000 25,000
3 13,000 15,000
Which one of the following statements about the discounted payback method is true?
A) The discounted payback technique tends to favor longer term projects over shorter term projects
B) The discounted payback period method completely ignores cash flows that occur after the initial investment has been recouped
C) The discount
A project that costs $2,500 to install will provide annual cash flows of $600 for the next 6 years. If the firm accepts projects with payback periods of less than 5 years should the project be accepted?
The manager of Simple Company must choose between two investments. Project A costs $50,000 and promises cash savings of $10,000 a year over a useful life of 10 year. Project B costs $60,000, and the estimated cash savings are $11,000 per year over a useful life of 11 years. Using the payback method, determine which project the m
Which of the following is a shortcoming of the payback period as a capital budgeting criterion?
It's easy to calculate
It doesn't use free cash flows
It ignores the time value of money
It uses accounting profits
It's easy to understand
A company with $2,000,000 in operating assets is considering purchasing a machine that costs $300,000 and which is expected to reduce operating costs by $60,000 each year. The payback period for this machine in years is closest to ______?