Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 11, Problem 2Q
Summary Introduction
To explain: The three potential flaws with regular payback method and whether the discounted payback method corrects all three flaws.
Introduction:
Payback Period:
It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.
Discounted Payback Period:
It refers to the time that a project takes to repay the amount invested with some return attached to it after considering the
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Chapter 11 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 11 - How are project classifications used in the...Ch. 11 - Prob. 2QCh. 11 - Why is the NFV of a relatively long-term project...Ch. 11 - Prob. 4QCh. 11 - If two mutually exclusive projects were being...Ch. 11 - Discuss the following statement: If a firm has...Ch. 11 - Prob. 7QCh. 11 - Project X is very risky and has an NPV of 3...Ch. 11 - Prob. 9QCh. 11 - A firm has a 100 million capital budget. It is...
Ch. 11 - NPV Project L costs 65,000, its expected cash...Ch. 11 - IRR Refer to problem 11-1. What is the projects...Ch. 11 - MIRR Refer to problem 11-1. What is the projects...Ch. 11 - PAYBACK PERIOD Refer to problem 11-1. What is the...Ch. 11 - Prob. 5PCh. 11 - NPV Your division is considering two projects with...Ch. 11 - CAPITAL BUDGETING CRITERIA A firm with a 14% WACC...Ch. 11 - CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS...Ch. 11 - Prob. 9PCh. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - Prob. 12PCh. 11 - MIRR A firm is considering two mutually exclusive...Ch. 11 - CHOOSING MANDATORY PROJECTS ON THE BASIS OF LEAST...Ch. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - CAPITAL BUDGETING CRITERIA A company has an 11%...Ch. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - CAPITAL BUDGETING CRITERIA Your division is...Ch. 11 - BASICS OF CAPITAL BUDGETING You recently went to...
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- What are the two main drawbacks of the payback method?arrow_forwardExplain the payback period model and its two significant weaknesses. How does the discounted payback period model addresses one of the problems?arrow_forwardWhat are one advantage and one disadvantage of the payback method?arrow_forward
- What is the discounted-payback method?arrow_forwardDid you use the same discount rate in the FCF vs DDM model? If so, why? If not, why not?arrow_forwardN4 Explain in very details the Discounting rate approaches: 1) Top-down Approach 2) Bottom-up approach Kindly, show the formulas, any mathematical process and any illustration that enhance the understanding the approachesarrow_forward
- Please help me solve (especially payback / discount payback)arrow_forwardstate the limitations of the payback period with illustration?arrow_forwardWhen performing benefit-cost analysis, economists usually discount future benefits and costs. Why? What are some reasons/justifications to apply relatively high discount rates? What counter-arguments are there to apply relatively low discount rates?arrow_forward
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