Finance

Acme, Inc. is considering a four-year project that has initial outlay

Acme, Inc. is considering a four-year project that has initial outlay or cost of $100,000. The respective cash inflows for years 1, 2, 3 and 4 are: $50,000, $40,000, $30,000 and $20,000. Acme uses the discounted payback period method, and has a discount rate of 11.50%. Will Acme accept the project if it’s payback period […]

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Date: September 19th, 2020

Identify and describe the shortcomings of the payback period model or

Identify and describe the shortcomings of the payback period model or method (without discounting). What will be an ideal response?     ANSWER Answer: The payback period method ignores cash inflows after the initial outflow has been recovered. Thus, this method is biased toward those projects that have higher cash inflows in earlier years and […]

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Date: September 19th, 2020

Acme, Inc. is considering a four-year project that has an initial outl

Acme, Inc. is considering a four-year project that has an initial outlay or cost of $80,000. The respective future cash inflows for years 1, 2, 3 and 4 are: $40,000, $40,000, $30,000 and $30,000. Acme uses the discounted payback period method and has a discount rate of 12%. Will Acme accept the project if it’s […]

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Date: September 19th, 2020

The initial outlay or cost is $1,000,000 for a four-year project. The

The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the payback period without discounting cash flows? A) About 2.50 years B) About 2.67 years C) About 3.67 years D) About 4.50 years   […]

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Date: September 19th, 2020