Question: It will cost $ 1 1 , 4 0 0 to acquire an ice cream cart that is expected to produce cash inflows of $

It will cost $11,400 to acquire an ice cream cart that is expected to produce cash inflows of $3,600 a year for three years. What is the decision based on the payback period, assuming the payback requirement is 2.5 years?
Accept because the project never pays back.
Cannot calculate the payback period to make decisions.
Reject because the payback period is 3.17 years.
Accept because the payback perod is 3.17 years.
Reject because the project never pays back over its life time
It will cost $11,400 to acquire an ice cream cart that

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:

it will cisr $12,600 to acquire an ice cream cart expected to produce cash inflows of $5390 a year for three years. after the three years, the cart is expected to be worthless. what us the payback...

Q:

QUESTION 1 Which of the following are advantages of the payback method of project analysis? a. Ignores time value of money, ease of use. b. Liquidity bias, ease of use. c. Considers time value of...

Q:

1.How much new stock will be issued next year? 2.Risk free rate is 2%.Equity Risk Premium is 6%.Beta is 1.5.What is the equity cost of capital? 3.Debt/Equity is 0.45Risk free rate is 3%Beta is...

Q:

Assume an investment has cash flows of $25,200, $7,000, $8,000, $8,500, and $9,000 for Years 0 to 4, respectively.What is the NPV if the required return is 11.1 percent? (do not round intermediate...

Q:

Question 1 The cost of preferred stock is computed the same as the: pretax cost of debt. rate of return on an annuity. aftertax cost of debt. rate of return on a perpetuity. cost of an irregular...

Q:

Question 11 The internal rate of return is defined as the: Maximum rate of return a firm expects to earn on a project. Rate of return a project will generate if the project is financed solely with...

Q:

exclusive projects have an initial cost of $47,500 each Project A 50) Two mutually cash inflows of $25,300, 537,100, and $22,000 for Years Project B produces respectively. The required rate of return...

Q:

(4.) a. A project has an initial cost of $7,000. The cash inflows are $1,000, $2,600, $3,000, and $4,000 over the next four years, respectively. What is the payback period? (Do not round intermediate...

Q:

12. A project will produce cash inflows of $3,200 a year for 4 years with a final cash inflow of $5,700 in year 5. The project's initial cost is $9,500. What is the net present value of this project...

Q:

1. The Dry Dock is considering a project with an initial cost of $107,770 and cash inflows for Years 1 to 3 of $37,200, $54,600, and $46,900, respectively. What is the IRR? 2. It will cost $9,971 to...

Q:

3. What does it mean to be True to yourself? Is being true to yourself more important than achieving personal career success in a male-dominated company? Is it okay to ena- ble the continuation of an...

Q:

Consider a 10 year endowment insurance policy to [45] with benefit amount of $150,000. If there is a death benefit, it is payable at the end of the year of death. Level annual premiums are to be paid...

Q:

2.92 Suppose the diagram of an electrical system is as given in Figure 2.10. What is the probability that the system works? Assume the components fail independently.

Q:

9. (15 points) A company is considering a new project that requires an investment of \$5 million. The project is expected to generate cash flows of $2 million in year 1,$3 million in year 2, and $4...

Q:

Explain the importance of nonverbal messages.

Q:

Describe the advantages of effective listening.

Q:

Prepare an employment application.