# The blue goose is considering a project with an

• Notes
• PrivateBraveryDeer8003
• 116
• 100% (15) 15 out of 15 people found this document helpful

This preview shows page 19 - 23 out of 116 pages.

##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
Chapter 10 / Exercise 12
Corporate Finance: A Focused Approach
Brigham/Ehrhardt
Expert Verified
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
8-19
##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
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?
8-20
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?
8-21
Chapter 08 - Net Present Value and Other Investment Criteria