MODULE 9 - UNRECORDED

# MODULE 9 - UNRECORDED - View Attempt

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09 Unrecorded Capital Budgeting Started: May 10, 2010 9:02 PM Submitted: May 10, 2010 9:07 PM Time spent: 00:05:24 Total score:0/300 = 0% 1-4 Non-DCF 1. Payback period example problem JPG The figure below illustrates annual expected cash flows for a project. Calculate the payback period. Nearest Student Response Value Correct Answer Feedback A. 2.25 years B. 3.6 years C. 2.51 years D. 3.67 years E. 2.33 years General Feedback: Sum the cash inflows until they total NCI of \$178,000. This is the example problem in the text book chapter. Score: 0/10 2. Payback period fraction of a month Humongus Distributing Associates is evaluating a proposal to change the way it trains sales representative along the U.S.-México border. The financial manager and a team of colleagues have put together the following estimates of incremental cash flows resulting from the training program: End of month Cash flow 0 -\$34,820 1 +\$8,120 2 +\$16,424 3 +\$8,280 View Attempt file:///C:/Users/Mat/Documents/00%20-%20school/CURRENT%20CL. ..

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4 +\$3,606 5 +\$6,667 6 -\$3,463 Should Humongus Distributing Associates accept the proposal based on payback analysis? Support your answer by calculating the payback period of the proposal in years. Express the fraction of the year as a decimal to two decimal places. Student Response Value Correct Answer Answer: not answered 0% 3.54 General Feedback: REM that these values are monthly, so you calculate the months to recapture the net capital invested. You don't know if the proposal should be accepted because the maximum acceptable period isn't given in the problem. Score: 0/10 3. Payback period as IRR (CMA/CFM Examination) In capital budgeting analysis the payback reciprocal may provide a quick and useful estimate of the internal rate of return only when Student Response Value Correct Answer Feedback A. the investment outlays are made uniformly throughout the life of the investment. B. cash inflows do not extend beyond the length of the payback period. C. most of the cash inflows from an investment precede the investment outlay. D. cash inflows are uniform through the View Attempt file:///C:/Users/Mat/Documents/00%20-%20school/CURRENT%20CL. ..
Student Response Value Correct Answer Feedback life of an investment which is long relative to its payback period. E. cash inflow amounts vary erratically during the life of the investment. Score: 0/10 4. ARR example problem The financial manager of Tennis Clubs USA wants to calculate the average rate of return on investment in a proposed six-year project. He has estimated the amount of net capital invested as follows: Investment in depreciable property \$120,000 Investment tax credit (10%) \$ 12,000 Increase in receivables \$ 96,000 Increase in current liabilities \$ 26,000 Working with a team comprised of the cost accountant, production manager, human resource manager, tax accountant, and marketing manager, he put together the expected operating income statements and expected cash flows below. What is the expected accounting rate of return on investment based on the information? Nearest

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## This note was uploaded on 05/10/2010 for the course FINA 3770 taught by Professor Chandy during the Fall '08 term at North Texas.

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MODULE 9 - UNRECORDED - View Attempt

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