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

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