Becker Inc. uses discounted payback period for projects under $25,000 and has a cut off period of

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Becker Inc. uses discounted for projects under $25,000 and has a cut off period of 4 years for these small value projects. Two projects, R and S, are under consideration. The anticipated cash flows for these two projects are listed below. If Becker Incorporated uses an 8% on these projects, are they accepted or rejected? If it uses 12% A 16% Why is it necessary to only look at the first four years of the projects€™ cashflows?

Becker Inc. uses discounted payback period for projects under $25,000

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...

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Solution at 8 Project R PV Cash flow year one 6000 108 555556 PV Cash flow year two 8000 108 2 685871 PV Cash flow year three 10000 108 3 793832 PV Ca...View the full answer

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Financial Management Core Concepts

ISBN: 978-0132671033

2nd edition

Authors: Raymond M Brooks

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Question Posted: May 08, 2014 07:55 AM

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Becker Inc. uses discounted payback period for projects under $25,000 and has a cut off period of

Question:

Cash Flow Initial cost Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Project R $24,000 6,000 $ 8,000 $10,000 $12,000 Project S $18,000 $9,000 6,000 6,000 3,000

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Solution at 8 Project R PV Cash flow year one 6000 108 555556 PV Cash flow year two 8000 108 2 685871 PV Cash flow year three 10000 108 3 793832 PV Ca...View the full answer

Financial Management Core Concepts

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