Question: Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable payback is five years.

Time: 0 1 2 3 4 5
Cash Flow -75 -75 0 100 75 50

a. 4.67 years, accept

b. 3.67 years, accept

c. 3.67 years, reject

d. 4.67 years, reject

Please provide step by step calculations

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
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!

Q:

You have been employed as a consultant to Golf R Us, Inc. The company has been having problems with account receivables and they want to use various dunning methods to better their receivables. But...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and the...

Q:

1.A particular security's default risk premium is 6 percent.For all securities, the inflation risk premium is 2 percent and the real interest rate is 3 percent.The security's liquidity risk premium...

Q:

11) Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 1 0 percent and...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the...

Q:

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and the...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the...

Q:

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below ift appropriate cost of capital is 8 percent and the...

Q:

You want to buy new car that will cost $93,000. The bank will lend you the money at 8.7% p.a. compounded quarterly over five years. To reduce the amount of the loan repayments you will make a special...

Q:

What is the work done on a 300-W electric grinder in 5.0 min?

Q:

Bonds payable amounting to 50,000 were retired through issuance of ordinary shares affected statement of cash flows or not

Q:

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...