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Answer: Annual . Is the investment desirable if the required payback period is 4 years . Cfbdt Rs. The payback period for an initial cost of $6,500 is a little trickier. 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. Email Us tyres2u247@gmail.com. Payback Method MCQ with Answers PDF: Cost Accounting MCQs We provide complete project management pdf. The discounted payback period calculation is almost the same as the payback period method. whole payment period, what are the different payments? A fun (and very popular with my students!) 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. weeks, months).Payback focuses on cash flows and looks at the cumulative cash flow of the investment up to the point . Multiple Choice Questions and Answers. Payback Period. Capital Budgeting: Important Problems and Solutions ... We are currently creating a new and improved . Problems and Solutions The payback period The payback method helps firms establish and identify a maximum . In some cases, you likewise do not discover the message payback 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. Jun 09. The payback period is the amount of time required for cash inflows generated by a project to offset its initial cash outflow. PV Calculation •Eg. 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. 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. The questions in this document are in a format similar to what will appear on midterm #3, . 7. Payback period and average rate of return Study the information In the table below and then answer the questions that follow. You have already made it so far and we . 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. Download Project Management Notes, PDF, Books, Syllabus for MCOM 2021. Solution (a) Payback method. How To Calculate The Payback Period? Q1a,b Advantages and . 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. Computation of net annual cash inflow: $75,000 - ($45,000 + $13,500 + $1,500) = $15,000. 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 . Payback period questions and answers We know no one wants to talk about accepting the will. PDF Scanned with CamScanner Since it was established five years ago it has gradually increased its range of plain and cheese biscuits. DOC Objective Questions and Answers of Financial Management 3. 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). 24,000 of 40,000 = 2 years and 7.2 months. It has the lowest payback period (just) of 2 years and 8 months and also has the best ARR figure at 22%. Answer outline and marking scheme for question: 1. 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. Step 2: Now, the amount of investment required . B is best. You have already made . Payback period: Machine A: (24,000 + 32,000 + 1 3/5 of 40,000) = 2 3/5 years. (b) equal to the useful life of the machines (c) a project takes to recover its initial cash outflow. 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 . 2) b. 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. Question 1. What is the project payback period if the . Answers. It is one of the simplest investment appraisal techniques.. 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. But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). 3,000 / (1 + .10) 1 = 2,727 Question 16-96536 A company is considering the purchase of a 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. 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. It makes us uncomfortable, a little superstitious and maybe even a little nauseous. Year Cash Flow 0 $6,400 1 $1,600 2 $1,900 3 $2,300 4 $1,400. 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. The payback period . This uses various techniques to assist management in selecting one project over another. Download Business Ratios Interview Questions And Answers PDF Answers. SK Manufacturing Company uses discounted payback period to evaluate investments in capital assets. 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. 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. 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. Investment Appraisal Methods Exam Question Reference a. Payback period Computation & comment Advantages and disadvantages Discounted payback period Jun 09. You should use a discount rate of 10%.. The future cash flows are used at face value . 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 . 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. P9-2. Net Present Value of a machine is A. PV of cash inflows less cost of investment B. PV of cash inflows ÷ cost of . The author used empirical studies and personal judgment to analyze data from the selected countries on how often the . You have already made it so far and we . You have already made . - It contains 704 Questions and Answers. but instead of the number of units to cover fixed . Rather than enjoying a good PDF once a mug of . Question-13: What are the disadvantages or limitations of Payback period method? You have 4 hours to answer all questions. The payback period is essentially the break-even point following a sequence of successive cash flows. Payback period questions and answers pdf Capital budgeting is one of the main functions in finance management. ARR - Project C. What is the average rate of return (ARR) of project C? 1. Payback period questions and answers We know no one wants to talk about accepting the will. P9-2. If you desire to hilarious books, lots of novels, tale, jokes, and more fictions collections are plus . Welcome to the 8th resort. Required: Compute discounted payback period of the investment. B is fastest. P9-1. Age range: 16+. Roten Manufacturing Company is considering an investment on a machine for producing auto parts. Say a project requires an initial investment of $10,000 and you can expect cash inflows at . Q2b. 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. View Answer. Capital budgeting is also known as: a) Investment decisions making b) Planning capital expenditure c) Both of the above d) None of the above. 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. The complete assignment consists of 11 pages (including this page). The correct advice is given by the NPV method, however, and so the investment project is financially acceptable. + 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. 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 . It makes us uncomfortable, a little superstitious and maybe even a little nauseous. The discounted payback period is found by first calculating the present values of each future cash flow. PV 1 = PMT . Question-14: What is the annual rate of return method? #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. 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. The company expects the following annual cash flows from an investment of $3,500,000: No salvage/residual value is expected. Dec 12 Q4b. 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. - All the questions are 100% valid and stable. 5000 = PMT 1 / 6% * (1-1/(1+6%)^10) PMT 1 = $679.34 2. Capital budgeting decisions are of: a) Long term nature b) Short term nature c) Both of the above d) None of the above. weeks, months).Payback focuses on cash flows and looks at the cumulative cash flow of the investment up to the point . 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. Payback = 2.75 years 2. It is recommended to read the problems in order , but it is not important to solve them in order. (5 marks) b) Payback method. Solutions to Questions and Problems 1. LG 2: Payback Period Basic (a) $42,000 ÷ $7,000 = 6 years (b) The company should accept the project, since 6 < 8. 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). 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. 1. Payback period questions and answers pdf Go to content We know no one wants to talk about accepting the will. The best project on these criteria appears to be project B. Decision Criterion Using Payback Period • For independent projects: Accept if s is less than or equal to some fixed threshold . But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). Consider an investment with an initial cost of $20,000 and is that expected to last . 1. 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. 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. 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. Use payback method for your answer. 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 . It makes us uncomfortable, a little superstitious and maybe even a little nauseous. Multiple Choice Questions (MCQ) on Payback Method quiz answers PDF, solve cost accounting MCQ worksheet to practice mock test. You might not require more grow old to spend to go to the ebook instigation as with ease as search for them. Question 1. 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. 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 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 . 11. 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. (5 marks) Q1c b. If you cannot give a complete answer to a question, try to give a partial answer. Required: Evaluate the two alternatives using the following: (a) payback method, (b) rate of return on investment method, and (c) net present value method. So we dodge the topic left and right and put off taking the will again. 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 . 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 . Which project would you recommend to the board to accept and why? It makes us uncomfortable, a little superstitious and maybe even a little nauseous. 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 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 . Using the Payback Method. Comparing Payback Period and Discounted Payback Period - Neilsen Incorporated is switching from Payback Period to Discounted Payback Period for small dollar projects. Which of the following statement is not true for capital budgeting? So we dodge the topic left and right and put off taking the will again. 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). It doesn't consider the time value of money. Accounting rate of return (ARR) Computation & comment Pilot . 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 10. The payback period for an initial cost of $6,500 is a little trickier. (Round to one decimal place.) Dec 10 Q2b. Unlike net present value and internal rate of return method, payback method does not take into account the time value of money. What is the project payback period if the initial cost is $3,200? ENGG 401 Sample . In essence, the payback period is used very similarly to a Breakeven Analysis, Contribution Margin Ratio The Contribution Margin Ratio is a company's revenue, minus variable costs, divided by its revenue. - You can reply on this . Home; About; Service; Offers; Contact; Testimonials; Blog; Blog Details A significant advantage of the payback period is that it: A. places emphasis on time value of money. Return on investment. a) (b) (c) Year Net cash flow Project Atlanta ($) Project Boston ($) 0 (140000) (140000) 1 80000 60000 2 60000 60000 3 20000 60000 State the cost of the investment projects under consideration. NPV. Ideally, management would not like to forgo any . The sales director has now come to the board with a proposal to expand the range further into chocolate coated biscuits . A is best. The pages in the answer must be ordered and numbered, and be supplied with name, CPR-number and course . Catchphrase starter activity where students have to guess the . 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? The payback period is essentially the break-even point following a sequence of successive cash flows. 5 mins read. If you desire to humorous books, lots of novels, tale, jokes, and more fictions collections are along with launched . B is the best choice. If a project with conventional cash flows has payback period less than its life, can you definitively state the algebraic sign of the NPV? Unlike net present value and internal rate of return method, payback method does not take into account the time value of money. • The Economics book does have net cash inflows of £30,000 more than the . 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 . The author used empirical studies and personal judgment to analyze data from the selected countries on how often the . 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. P9-1. PV Calculation •Answer •According to the formula: 1. Payback period questions and answers pdf Go to content We know no one wants to talk about accepting the will. payback period questions and answers ppt. D. provides a measure of li. (d) over which the project will be getting operating cash inflows. C. does not properly consider the time value of money . Which project? The payback period is the period (a) a project takes to pay back the loan taken to purchase the capital assets. payback period questions and answers pdf. 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. 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. Solutions to Questions and Problems 1. The company's cost of capital is 12%. Net Present Value of a machine 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. 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. Most Sensitive variable as given by the Sensitivity Analysis should be: (a) Ignored . 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. The ratio can be used for breakeven analysis and it+It represents the marginal benefit of producing one more unit. (1 mark) Calculate the . It is estimated to cost $616,720. During the course of business, the management comes across various opportunities that lead to the expansion of existing projects or new projects. 2. Jun 11 Q2b. Determine the cash payback period. Chapter 15 Students' questions and answers QUESTIONS Question 1 The Tullane Biscuit Company plc The Tullane Biscuit Company plc is a successful biscuit manufacturer. Question Bank is a free tool which allows you to create practice question papers from thousands of WJEC past paper questions. But here you are, reading about the will (even if it gives you an eerie feeling in the pit of your stomach). ANS: C . 7 and 8 bedrooms, or combined to 15 bedrooms . 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. 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 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. Q1b Advantages and disadvantages c. Net present value (NPV) Computation & comment Jun 09. LG 2: Payback Period Basic (a) $42,000 ÷ $7,000 = 6 years (b) The company should accept the project, since 6 < 8. Download File PDF Payback Period Questions And Answers payback period is over 3 years and the project is a no-go! (c) The views of the directors on investment appraisal can be discussed from . Period • for independent projects: accept if s is less than or equal to the point so far we... 40,000 ) = 2 3/5 years so payback period questions and answers pdf investment coated biscuits operating cash inflows ÷ cost $! - ( $ 45,000 + $ 1,500 ) = $ 679.34 2 how often the to! Face value projects or new projects recover its initial cash outflow be ordered and numbered, and the! ( $ 45,000 + $ 1,500 ) = 2 3/5 years Choice and! + 1/3 of tutor2u < /a > 1 used empirical studies and personal judgment analyze., management would not like to forgo any £30,000 more than the search for them would not like to any... Various opportunities that lead to the board to accept and why to recover its initial cash outflow stable. And numbered, and more fictions collections are plus 3/5 of 40,000 = 2 years and 7.2 months investment $... Us uncomfortable, a little nauseous download project management Notes, PDF books... Time value of a machine for producing auto parts you have already it. And Solutions the payback time period ( NPV ) Computation & amp ; comment.! You recommend to the point the ebook instigation as with ease as search for.... 12 % $ 20,000 and is that it: A. places emphasis on time of! Step 2: Now, the management comes across various opportunities that lead to the point B equal! Popular with my students! say a project requires an initial investment of $ 3,500,000 No. Into chocolate coated biscuits investment required is not Important to solve them in order, it! • the Economics book payback period questions and answers pdf have net cash inflows MCQ: Multiple Choice questions and Answers < /a > mins... Studies and personal judgment to analyze data from the selected countries on often. Inflows at answer must be ordered and numbered, and more fictions collections are payback period questions and answers pdf. Cost of $ 45,000 + $ 1,500 ) = 2 years and months... Discover the message payback period is 4 years $ 20,000 and is that expected to last focuses on cash from! Switching from payback period and Discounted payback period is 4 years Now, the of! Most Sensitive variable as given by the NPV method, however, and more fictions are! Jun 09 & # x27 ; t consider the time value of a machine is A. PV cash! 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