Your family business has chosen to invest in a project that should generate cash flows of...
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Your family business has chosen to invest in a project that should generate cash flows of $132,000 per year for 5 years. The initial investment cost is $520,000. a) Should we accept this project if the required payback period is 4 years. (2 points) b) Should we accept this project if the required discounted payback period is 4 years knowing that the discount rate is 4%. (2 points) c) Should we accept this project if the minimum rate of return required is 10%. (2 points) d) Suppose that each year, the expected annual net benefits of this project constitute 25% of the annual cash flows generated by this project. Calculate the accounting rate of return for this project by considering a linear amortization of the cost of the project. (2 points) Your family business has chosen to invest in a project that should generate cash flows of $132,000 per year for 5 years. The initial investment cost is $520,000. a) Should we accept this project if the required payback period is 4 years. (2 points) b) Should we accept this project if the required discounted payback period is 4 years knowing that the discount rate is 4%. (2 points) c) Should we accept this project if the minimum rate of return required is 10%. (2 points) d) Suppose that each year, the expected annual net benefits of this project constitute 25% of the annual cash flows generated by this project. Calculate the accounting rate of return for this project by considering a linear amortization of the cost of the project. (2 points)
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Answer rating: 100% (QA)
SOLUTION a To determine if we should accept this project with a required payback period of 4 years we need to calculate the payback period for the pro... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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