The blue goose is considering a project with an

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Corporate Finance: A Focused Approach
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Chapter 10 / Exercise 12
Corporate Finance: A Focused Approach
Brigham/Ehrhardt
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65. The Blue Goose is considering a project with an initial cost of $42,700. The project will produce cash inflows of $8,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period? A. 2.87 years B. 3.23 years C. 3.41 years D. 3.79 years E. 4.23 years
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Corporate Finance: A Focused Approach
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Chapter 10 / Exercise 12
Corporate Finance: A Focused Approach
Brigham/Ehrhardt
Expert Verified
Chapter 08 - Net Present Value and Other Investment Criteria 66. Today, Crunchy Snacks is investing $487,000 in a new oven. As a result, the company expects its cash flows to increase by $62,000 a year for the next two years and by $98,000 a year for the following three years. How long must the firm wait until it recovers all of its initial investment?
67. Lester's Feed Mill is spending $230,000 to update its facility. The company estimates that this investment will improve its cash inflows by $46,500 a year for 10 years. What is the payback period?
68. EEG, Inc. is considering a new project that will require an initial cash investment of $388,000. The project will produce no cash flows for the first two years. The projected cash flows for years 3 through 7 are $69,000, $88,000, $102,000, $140,000, and $160,000, respectively. How long will it take the firm to recover its initial investment in this project?
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Chapter 08 - Net Present Value and Other Investment Criteria 69. Major Importers would like to spend $211,000 to expand its warehouse. However, the company has a loan outstanding that must be repaid in 2.5 years and thus will need the $211,000 at that time. The warehouse expansion project is expected to increase the cash inflows by $48,000 in the first year, $139,000 in the second year, and $210,000 a year for the following two years. Should the firm expand at this time? Why or why not? A. Yes; because the money will be recovered in 1.69 years B. Yes; because the money will be recovered in 1.87 years C. Yes; because the money will be recovered in 2.11 years D. No; because the project never pays back E. No; because the money will not be recovered in time to repay the loan
70. What is the payback period for a $27,500 investment with the following cash flows?
71. Services United is considering a new project that requires an initial cash investment of $75,000. The project will generate cash inflows of $26,500, $32,700, $18,500, and $10,000 over each of the next four years, respectively. How long will it take to recover the initial investment?
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Chapter 08 - Net Present Value and Other Investment Criteria

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