Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assignment 11- The Basics of Capital Budgeting 7. The payback peried The payback method helps firms establish and identify a maximum acceptable payback peried thet

image text in transcribed

image text in transcribed

Assignment 11- The Basics of Capital Budgeting 7. The payback peried The payback method helps firms establish and identify a maximum acceptable payback peried thet helps in their Aa Aa capital budgeting decisions. Consider the case of Cold Gouse Metal Works Inc. Cold Goose Metal Works Inc. is a small firm, and several of its managers are worried about how soon the frm will be able to recover its initial investment from Project Delta's expected future cash fows. Te answer this question, Cold Goose's 0 has asked that you compute the project's payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table Year 0 Year 1 Year 2 Year 3 Expected cash fow Cumulative cash flow 5,000,000$2,000,000$4,250,000$1 ,750,000 The conventional payback period ignores the time value of money, and this concerns Cold Goose's CFO, He has now asked you to compute Deita's discounted payback period, assuming the company has a 8o% cost of capital. Complete the folowing table and perform any necessary cakculations. Round the discounted cash fnow values to the nearest whale dollar, and the discounted payback penod to the nearest two desimal places, For full credist, complete the entire tebie. Year 0 Year 1 Year 2 Year 3 5,000,000$2,000,000 $4.250 000$1,750,000 Cash flo Discounted csh flow Cumulative discounted cash flow Discounted payback period

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance For Executives Managing For Value Creation

Authors: Gabriel Hawawini, Claude Viallet

3rd Edition

0324274319, 9780324274318

More Books

Students also viewed these Finance questions

Question

=+a) Why is there no coefficient for Medium?

Answered: 1 week ago

Question

=+Could you use an ambient ad?

Answered: 1 week ago