Ideally, management would not like to forgo any . The payback period is 3.4 years ($20,000 + $60,000 + $80,000 = $160,000 in the first three years + $40,000 of the $100,000 occurring in Year 4). Payback & ARR - self-test questions The only difference is that the annual cash flows are discounted: in other words, the present value of each year's cash inflow is used. Payback period questions and answers We know no one wants to talk about accepting the will. 11. You have already made it so far and we . PDF Payback period questions and answers (d) over which the project will be getting operating cash inflows. PDF Payback period questions and answers pdf 7. PDF Chapter #8 Solutions to Questions and Problems 1. Payback ... 1. TherefoÑ, Payback period 5,000 = 5 years + 8,000 = 5.62 yours, (ii) Net Present Value (at cost of capital) Year 10 cash now Rss 7,000 7,000 7,000 7,000 8,000 10,000 15,000 10,000 4,000 Total PV of inflows Less Initial outlay Net Present Value .751 .683 .621 *513 .386 Scanned with CamScanner Question 1. ENGG 401 Sample . The payback period is the amount of time required for cash inflows generated by a project to offset its initial cash outflow. Home; About; Service; Offers; Contact; Testimonials; Blog; Blog Details Investment Appraisal Methods Exam Question Reference a. Payback period Computation & comment Advantages and disadvantages Discounted payback period Jun 09. Answer outline and marking scheme for question: 1. - It contains 704 Questions and Answers. Exam-style Questions | S-cool, the revision website Payback Period and NPV: Their Different Cash Flows Kavous Ardalan1 Abstract One of the major topics which is taught in the field of Finance is the rules of capital budgeting, including the Payback Period and the Net Present Value (NPV). PDF Payback Period Questions And Answers NPV. If a project with conventional cash flows has payback period less than its life, can you definitively state the algebraic sign of the NPV? 1. If the initial cost is $3,400, the payback period is: Payback = 4.10 years For the $3,400 cost, the payback period is: Payback = 4.10 years For an initial cost of $4,450, the payback period is: Payback = 5.36 years The payback period for an initial cost of $6,800 is Total cash inflows = $6,640 If the initial cost is $6,800, the . Jun 11 Q2b. Cfbdt Rs. Payback Period. In Sensitivity Analysis, the emphasis is on assessment of sensitivity of (a) Net Economic Life, (b) Net Present Value, (c) Both (a) and (b), (d)None of (a) and (b) 14. Payback = 2.75 years 2. Answers. Payback period reasoning suggests that project should be only accepted if the payback period is less than a cut-off period (payback period set by the business).So let us look at our . It doesn't consider the time value of money. It makes us uncomfortable, a little superstitious and maybe even a little nauseous. View Answer. Catchphrase starter activity where students have to guess the . If you desire to hilarious books, lots of novels, tale, jokes, and more fictions collections are plus . LG 2: Payback Period Basic (a) $42,000 ÷ $7,000 = 6 years (b) The company should accept the project, since 6 < 8. 5000 = PMT 1 / 6% * (1-1/(1+6%)^10) PMT 1 = $679.34 2. Payback period questions and answers pdf Go to content We know no one wants to talk about accepting the will. Payback is perhaps the simplest method of investment appraisal.The payback period is the time it takes for a project to repay its initial investment.Payback is used measured in terms of years and months, though any period could be used depending on the life of the project (e.g. The Payback period is a capital budgeting technique based on establishing how long it takes to recover the initial investment from the cumulative cash flows. appraisal techniques - short answer questions ; Quantitative factors - numerical questions (1) Quantitative factors - numerical questions (2) Investment appraisal - quantitative factors - numerical questions 2 Ahandbook is really a user's guide to operating the . C. does not properly consider the time value of money . The payback period is the period (a) a project takes to pay back the loan taken to purchase the capital assets. Step 2: Now, the amount of investment required . P9-1. The author used empirical studies and personal judgment to analyze data from the selected countries on how often the . Dec 12 Q4b. The discounted payback period is found by first calculating the present values of each future cash flow. weeks, months).Payback focuses on cash flows and looks at the cumulative cash flow of the investment up to the point . The questions in this document are in a format similar to what will appear on midterm #3, . So we dodge the topic left and right and put off taking the will again. Answers. Solutions to Questions and Problems 1. TherefoÑ, Payback period 5,000 = 5 years + 8,000 = 5.62 yours, (ii) Net Present Value (at cost of capital) Year 10 cash now Rss 7,000 7,000 7,000 7,000 8,000 10,000 15,000 10,000 4,000 Total PV of inflows Less Initial outlay Net Present Value .751 .683 .621 *513 .386 Scanned with CamScanner You have 4 hours to answer all questions. This calculation is useful for risk reduction analysis, since a project that generates a quick return is less risky than one that generates the same return over a longer period of time. LG 2: Payback Period Basic (a) $42,000 ÷ $7,000 = 6 years (b) The company should accept the project, since 6 < 8. But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). (c) The views of the directors on investment appraisal can be discussed from . Use payback method for your answer. but instead of the number of units to cover fixed . But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). Colourful slides, animations, video links, fun activities, as well as questions (with answers provided) are all included in this engaging and informative lesson on calculating the payback period, applicable to all syllabi. 3. PV Calculation •Answer •According to the formula: 1. Payback Period Questions and Answers | Study.com The payback period for Alternative A is 3.125 years (i.e., 3 years plus 1.5 months). 1. 3,000 / (1 + .10) 1 = 2,727 Question 16-96536 A company is considering the purchase of a We are currently creating a new and improved . Is the investment desirable if the required payback period is 4 years . A is best. You might not require more grow old to spend to go to the ebook instigation as with ease as search for them. payback period questions and answers pdf. Required: Evaluate the two alternatives using the following: (a) payback method, (b) rate of return on investment method, and (c) net present value method. The payback period is essentially the break-even point following a sequence of successive cash flows. The payback period . Accounting rate of return (ARR) Computation & comment Pilot . (1 mark) Calculate the . Multiple Choice Questions and Answers. The sales director has now come to the board with a proposal to expand the range further into chocolate coated biscuits . Data Source and Method of Collection The author used theories on payback period method and past research work which companies used in appraising investment and he has used it as secondary data in order to be able to answer the questions raised in the research hypothesis. B is best. You have already made . The company expects the following annual cash flows from an investment of $3,500,000: No salvage/residual value is expected. In essence, the payback period is used very similarly to a Breakeven Analysis, Contribution Margin Ratio The Contribution Margin Ratio is a company's revenue, minus variable costs, divided by its revenue. Computation of net annual cash inflow: $75,000 - ($45,000 + $13,500 + $1,500) = $15,000. Download Ebook Payback Period Questions And Answers Payback Period Questions And Answers Thank you definitely much for downloading payback period questions and answers.Maybe you have knowledge that, people have see numerous time for their favorite books later this payback period questions and answers, but stop taking place in harmful downloads. Solution: Step 1: In order to compute the payback period of the equipment, we need to workout the net annual cash inflow by deducting the total of cash outflow from the total of cash inflow associated with the equipment. Principally, when computing the payback period, an assumption is made that any cash flow that occurred within a certain period was realized consistently and continuously all through that period, and not at a particular point in time. The pages in the answer must be ordered and numbered, and be supplied with name, CPR-number and course . Notice that the total cash inflows after eight years will be: Total cash inflows = 8($765) = $6,120 If the initial cost is $6,500, the project never pays back. Project Management study material includes project management notes, book, courses, case study, syllabus, question paper, MCQ, questions and answers and available in project management pdf form. PV Calculation •Eg. Chapter 9 Capital Budgeting Techniques Solutions to Problems Note to instructor: In most problems involving the internal rate of return calculation, a financial calculator has been used. Comparing Payback Period and Discounted Payback Period - Neilsen Incorporated is switching from Payback Period to Discounted Payback Period for small dollar projects. During the course of business, the management comes across various opportunities that lead to the expansion of existing projects or new projects. Welcome to the 8th resort. Because the discounted cash flow values are smaller (i.e., money is worth less overtime) in this case, the discounted payback period is longer than the payback period. PAYBACK PERIOD QUESTIONS AND ANSWERS PDF Payback period is the number of years required to recover the cost of project or initial cash out flows. Notice that if you use the shortcut for annuity cash flows, you get: Payback = $6,500 / $765 = 8.50 years This answer does not make sense since the cash flows stop . The payback period for an initial cost of $6,500 is a little trickier. Payback = 2.75 years 2. The author used empirical studies and personal judgment to analyze data from the selected countries on how often the . Answer: Annual . - You can reply on this . Download Business Ratios Interview Questions And Answers PDF payback period questions and answers ppt. D. provides a measure of li. Net Present Value of a machine whole payment period, what are the different payments? Payback is perhaps the simplest method of investment appraisal.The payback period is the time it takes for a project to repay its initial investment.Payback is used measured in terms of years and months, though any period could be used depending on the life of the project (e.g. So we dodge the topic left and right and put off taking the will again. 5 mins read. You should use a discount rate of 10%.. Rather than enjoying a good PDF once a mug of . 9 Constant annuity N = 10 years PV = $5000 at year 0 (now) r 1(annually) = 6% for first 3 years Then, suddenly change interest policy: r 2(annually) = 8% for last 7 years What is the PMT of today? Multiple Choice Questions (MCQ) on Payback Method quiz answers PDF, solve cost accounting MCQ worksheet to practice mock test. Payback period is the time in which the initial outlay of an investment is expected to be recovered through the cash inflows generated by the investment. Return on investment. We provide complete project management pdf. Age range: 16+. Question-14: What is the annual rate of return method? Q1b Advantages and disadvantages c. Net present value (NPV) Computation & comment Jun 09. The best project on these criteria appears to be project B. Determine the cash payback period. Year Cash Flow 0 $6,400 1 $1,600 2 $1,900 3 $2,300 4 $1,400. (b) equal to the useful life of the machines (c) a project takes to recover its initial cash outflow. Read Online Payback Period Questions And Answers Payback Period Questions And Answers If you ally habit such a referred payback period questions and answers books that will provide you worth, get the categorically best seller from us currently from several preferred authors. The payback period for an initial cost of $6,500 is a little trickier. It has the lowest payback period (just) of 2 years and 8 months and also has the best ARR figure at 22%. The company's cost of capital is 12%. A significant advantage of the payback period is that it: A. places emphasis on time value of money. Which of the following statement is not true for capital budgeting? Roten Manufacturing Company is considering an investment on a machine for producing auto parts. (5 marks) P9-1. Consider an investment with an initial cost of $20,000 and is that expected to last . Payback Period. If you cannot give a complete answer to a question, try to give a partial answer. Dec 10 Q2b. If the initial cost is $3,400, the payback period is: Payback = 4.10 years For the $3,400 cost, the payback period is: Payback = 4.10 years For an initial cost of $4,450, the payback period is: Payback = 5.36 years The payback period for an initial cost of $6,800 is Total cash inflows = $6,640 If the initial cost is $6,800, the . 10. Accounting book payback period: 2 years + (130 ÷ 160) × 12 months = 2 years and 10 months Economics book payback period: 3 years exactly Payback: considerations • The Accounting book is clearly preferable on the payback method of investment appraisal, although the Economics book pays back only two months later. You have already made . a) (b) (c) Year Net cash flow Project Atlanta ($) Project Boston ($) 0 (140000) (140000) 1 80000 60000 2 60000 60000 3 20000 60000 State the cost of the investment projects under consideration. The discounted payback period calculation is almost the same as the payback period method. Solutions to Questions and Problems 1. Download Free Payback Period Questions And Answers Payback Period Questions And Answers If you ally habit such a referred payback period questions and answers book that will meet the expense of you worth, acquire the unconditionally best seller from us currently from several preferred authors. Answer: the disadvantages or limitations of Payback period method are as follows: The major disadvantage of this method is that it does not place much emphasis on the earning power of the project. A fun (and very popular with my students!) • The Economics book does have net cash inflows of £30,000 more than the . P9-2. Email Us tyres2u247@gmail.com. Principally, when computing the payback period, an assumption is made that any cash flow that occurred within a certain period was realized consistently and continuously all through that period, and not at a particular point in time. Payback period questions and answers We know no one wants to talk about accepting the will. The correct advice is given by the NPV method, however, and so the investment project is financially acceptable. Answers 1) c. Payback occurs in year 9, but the payback period for the project starts in year 3 (right after the end of year 2), so simple payback = 9 - 2 = 7 years. It makes us uncomfortable, a little superstitious and maybe even a little nauseous. Q2b. The payback period is essentially the break-even point following a sequence of successive cash flows. ARR - Project C. What is the average rate of return (ARR) of project C? Chapter 15 Students' questions and answers QUESTIONS Question 1 The Tullane Biscuit Company plc The Tullane Biscuit Company plc is a successful biscuit manufacturer. What is the project payback period if the . 24,000 of 40,000 = 2 years and 7.2 months. It makes us uncomfortable, a little superstitious and maybe even a little nauseous. Give yourself marks for mentioning any of the points below: a) Net present value is the present value of future income from an investment project, less the cost. 2) b. Required: Compute discounted payback period of the investment. Most Sensitive variable as given by the Sensitivity Analysis should be: (a) Ignored . Question-13: What are the disadvantages or limitations of Payback period method? Find the questions you need, add them to your paper and export your paper with accompanying mark scheme and examiner's comments as a PDF ready to use in the classroom. In Playback Period approach to risk the target payback period is (a)Not adjusted, (b)Adjusted upward, (c) Adjusted downward , (d) (b) or c. 13. The ratio can be used for breakeven analysis and it+It represents the marginal benefit of producing one more unit. P9-2. Payback Method multiple choice questions and answers PDF: If an initial investment is $765000, payback period is 4.5 years, then increase in future cash flow will be, with answers for online colleges for business administration. Net Present Value of a machine is A. PV of cash inflows less cost of investment B. PV of cash inflows ÷ cost of . Data Source and Method of Collection The author used theories on payback period method and past research work which companies used in appraising investment and he has used it as secondary data in order to be able to answer the questions raised in the research hypothesis. Question 1. Unlike net present value and internal rate of return method, payback method does not take into account the time value of money. PV 1 = PMT . The payback period is the period A. a project takes to pay back the loan taken to purchase the capital assets B. equal to the useful life of the machines C. a project takes to recover its initial cash outflow D. over which the project will be getting operating cash inflows 48. The purpose of this paper is to show that for a given capital budgeting project the cash flows to which the Payback Period rule is applied are different from . Say a project requires an initial investment of $10,000 and you can expect cash inflows at . SK Manufacturing Company uses discounted payback period to evaluate investments in capital assets. Chapter 9 Capital Budgeting Techniques Solutions to Problems Note to instructor: In most problems involving the internal rate of return calculation, a financial calculator has been used. Posted by October 31, 2020 Leave a comment on payback period questions and answers ppt October 31, 2020 Leave a comment on payback period questions and answers ppt It makes us uncomfortable, a little superstitious and maybe even a little nauseous. Notice that the total cash inflows after eight years will be: Total cash inflows = 8($765) = $6,120 If the initial cost is $6,500, the project never pays back. Machine B: (8,000 + 24,000 + 32,000 + 1/3 of . Q1c b. (Round to one decimal place.) Capital budgeting decisions are of: a) Long term nature b) Short term nature c) Both of the above d) None of the above. #PAYBACK PERIOD QUESTIONS AND ANSWERS #Download file | read online payback period questions and answers Latest GAQM APM-001 Associate in Project Management Exam Questions & Answers - This is the latest practice test to pass the GAQM APM-001 Associate in Project Management Exam. But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). Download File PDF Payback Period Questions And Answers payback period is over 3 years and the project is a no-go! Download Project Management Notes, PDF, Books, Syllabus for MCOM 2021. 3) d. 4) c. 5) c. This series is a combination of a present sum and a uniform series, and so it can be solved as . Q1a,b Advantages and . The complete assignment consists of 11 pages (including this page). 7 years is greater than the maximum target discounted payback period of two years and so from this perspective the investment project is not financially acceptable. - All the questions are 100% valid and stable. Access Free Payback Period Questions And Answers Payback Period Questions And Answers This is likewise one of the factors by obtaining the soft documents of this payback period questions and answers by online. It is estimated to cost $616,720. Solution (a) Payback method. Payback period questions and answers pdf Capital budgeting is one of the main functions in finance management. Problems and Solutions The payback period The payback method helps firms establish and identify a maximum . Which project? weeks, months).Payback focuses on cash flows and looks at the cumulative cash flow of the investment up to the point . So we dodge the topic left and right and put off taking the will again. These present values of future cash flows are then used to determine the payback time period. Payback Period: The payback period of a project is the time span it takes for the initial investment to be paid off by the expected future cash flows. Capital budgeting is also known as: a) Investment decisions making b) Planning capital expenditure c) Both of the above d) None of the above. B is fastest. Payback period and average rate of return Study the information In the table below and then answer the questions that follow. Which project would you recommend to the board to accept and why? 7 and 8 bedrooms, or combined to 15 bedrooms . Multiple choice questions and answers on bonds and bond valuation MCQ questions PDF covers topics: Bond valuation calculations, changes in bond values over time, coupon bonds, financial bonds, key characteristics of bonds, maturity risk premium, risk free rate of return, risk free savings This uses various techniques to assist management in selecting one project over another. Since cash flow estimates are quite accurate for periods in the near future and relatively inaccurate for periods in distant future due to economic and operational uncertainties . If you desire to humorous books, lots of novels, tale, jokes, and more fictions collections are along with launched . ANS: C . Unlike net present value and internal rate of return method, payback method does not take into account the time value of money. Payback period questions and answers pdf Go to content We know no one wants to talk about accepting the will. It is one of the simplest investment appraisal techniques.. In some cases, you likewise do not discover the message payback period . The future cash flows are used at face value . Jun 09. It is recommended to read the problems in order , but it is not important to solve them in order. Decision Criterion Using Payback Period • For independent projects: Accept if s is less than or equal to some fixed threshold . You have already made it so far and we . Payback period: Machine A: (24,000 + 32,000 + 1 3/5 of 40,000) = 2 3/5 years. B is the best choice. What is the project payback period if the initial cost is $3,200? appraisal techniques - short answer questions ; Quantitative factors - numerical questions (1) Quantitative factors - numerical questions (2) Investment appraisal - quantitative factors - numerical questions 2 Ahandbook is really a user's guide to operating the . 2. Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. + CF s ≥−CF 0 = I0 In words, s is the minimum length of time such that the sum of cash flows from a project is positive. (5 marks) b) Payback method. Since it was established five years ago it has gradually increased its range of plain and cheese biscuits. Question Bank is a free tool which allows you to create practice question papers from thousands of WJEC past paper questions. Using the Payback Method. Notice that if you use the shortcut for annuity cash flows, you get: Payback = $6,500 / $765 = 8.50 years This answer does not make sense since the cash flows stop . But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). So we dodge the topic left and right and put off taking the will again. Places emphasis on time value of money accounting rate of 10 % * ( 1-1/ 1+6.: What is the annual rate of 10 % the project payback period the payback helps! In the answer must be ordered and numbered, and more fictions collections are plus with. Or combined to 15 bedrooms 3,500,000: No salvage/residual value is expected flows looks. To some fixed threshold some cases, you likewise do not discover message! ^10 ) PMT 1 = $ 679.34 2 more grow old to spend go... Cost of capital is 12 % and identify a maximum of novels,,! Present value of money essentially the break-even point following a sequence of cash. Tutor2U < payback period questions and answers pdf > Answers be: ( a ) a project takes to recover its initial cash.... $ 20,000 and is that expected to last the directors on investment appraisal techniques, lots of,... A partial answer the ebook instigation as with ease as search for them: ( 8,000 + +... As with ease as search for them if the required payback period is the. Pdf, books, lots of novels, payback period questions and answers pdf, jokes, so... 24,000 + 32,000 + 1 3/5 of 40,000 ) = 2 years and months! The capital assets the simplest investment appraisal can be used for breakeven Analysis and represents!, management would not like to forgo any Notes, PDF, books, lots of novels tale! Now, the management comes across various opportunities that lead to the useful life of the following is... Cpr-Number and course should be: ( 24,000 + 32,000 + 1 3/5 of 40,000 ) 2. A href= '' https: //simplestudies.com/what-is-payback-period.html/page/3 '' > capital Budgeting MCQ: Multiple questions! Forgo any 32,000 + 1 3/5 of 40,000 = 2 years and 7.2 months them in order but. Compute Discounted payback period if the required payback period is essentially the break-even point following a of... The marginal benefit of producing one more unit net cash inflows at marginal... $ 13,500 + $ 1,500 ) = 2 3/5 years with an initial investment of $ 3,500,000: No value! 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