Question: ABC Inc. is considering a project that requires an initial investment of $200,000. The project will generate cash flows of $50,000, $70,000, $80,000, $90,000, and

ABC Inc. is considering a project that requires an initial investment of $200,000. The project will generate cash flows of $50,000, $70,000, $80,000, $90,000, and $100,000 at the end of the first, second, third, fourth, and fifth years, respectively. The company has a required rate of return of 12%. Using the payback period method and the net present value method, should ABC Inc. accept the project?

Step by Step Solution

★★★★★

3.37 Rating (147 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The detailed answer for the above question is provided below Payback period method The payback period is the amount of time required for the initial i... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

A firm is considering a project that requires an initial investment of $180,000. The equipment will be depreciated on a straight-line basis to a zero salvage value over a period of 6 years. The...

Ibez Co. is considering a project that requires an initial investment of $60,000 and will generate net cash flows of $16,000 per year for 6 years. Ibez requires a return of 9% on its investments. The...

A company is considering a project that requires an initial investment of $100,000 and is expected to generate cash flows of $30,000 per year for the next 5 years. Calculate the net present value...

The table below shows how Brett's utility increases as the number of avocados he consumes (per month) increases. Brett's utility is measured in utils, a name that economists invented to describe...

An investment manager is currently evaluating a project that requires an initial investment of $10,000 and will provide future cash flows that have a present value of $17,000. Required Calculate the...

The federal government proposes to construct a multipurpose water project to provide water for irrigation and municipal use. In addition, flood control and recreation benefits will be realized. The...

Griffiths Ltd. has a five-year lease, and the following lease liability amortization table was prepared when the lease was originally signed, using an 8% interest rate. Griffiths expects to pay...

On January 2, 2011, Jansing Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $40,000 with a residual value of $5,000. a. Prepare a...

On Your Mark is considering purchasing new manufacturing equipment that costs $1,300,000 and is expected to improve cash flows by $500,000 in year 1, $350,000 in year 2, $475,000 in year 3, $450,000...

Gators, Inc., is considering a project that requires an initial investment of $2,000,000 and that will generate the following cash inflows for the next five years: Year Cash Inflow at End of Year 1...

1. (3 pts) Find the angle between and . 2. (3 pts each) Let = and w= . a) Determine the projection of W onto . b) Find the work done in moving an object along...

An investor wishes to purchase a floating-rate bond that pays a coupon rate equal to LIBOR. However, she is worried that interest rates are going to fall, leading to her receiving a lower coupon...

During training, Dion's facial expressions and use of text speak sometimes caused miscommunication. In which step of the communication process is this likely to create a failure in communication?...

blem 5: The table lists the concentration of E. coli bacteria P (in billions per liter) after x hours. 20 0 3 5 8 P(x) 0.5 6.2 33.3 414 a. Find an exponential function of the form P(x) = Poa" that...

need help completing my one-month project. anyone willing help me. Ellipses Corp One Month Project Ellipses Corp is a small business that operates in Herndon, VA. The company is located at10 Period...

Prevosti Farms and Sugarhouse pays its employees according to their job classification. The following employees make up Sugarhouse's staff: Employee Number Name and Address Payroll information...

Fin 445/545 1. Consider the following quotes on the 3-month Eurodollar Futures contract as of Dec 2, 2016. March 2017 98.95 June 2017 98.815 September 2017 98.715 December 2017 98.57 What interest...

An aircraft engine is fitted with a single-sided centrifugal compressor. The aircraft flies with a speed of 230 m/s at an altitude where the pressure is 0.23 bar and temperature 217 K. The intake...

Allowed Attempts 1 Available Match each type of figurative language with the correct example. 1. The wrapped gift begged to be opened. A. Metaphor 2. My mouth is always the reason I get in trouble....

Consider the Vino project described in Exhibit T13.2. Suppose the government of Vino requires that you operate a local crisis center for alcoholics. Your refusal to do so will result in a government...

You are a successful U.K. wine producer and are considering investing in a second operation in the country of Vino (with currency V). International parity conditions hold, and the investment will be...

Pavgrange plc is considering expanding its operations. The company accountant has produced pro forma profit and loss accounts for the next three years assuming that: (a) The company undertakes no new...

The statement of financial position of Euston Ltd as at 31 December 20X2, with corresponding amounts, showed the following: 1. Property, plant and equipment includes the following: 2. An item of...

Sutton Pty Ltd is considering an investment project with an initial outlay of $110 000. Listed below are the estimated cash flows relevant to the project. The cash flows are equal to net profit...

Consider the Vino project described in Exhibit T13.2. Suppose that beginning in year 2, there is a 20% chance each year the government will seize your assets in Vino. Specifically, if the assets are...