Kaleb Konstruction, Inc., has the following mutually exclusive projects availabl
ID: 2714488 • Letter: K
Question
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent.
Calculate the payback period for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent.
Explanation / Answer
a)
Project F
Payback period = 2+ 30000/62500
Payback period = 2.48 years
Project G
Payback period = 3 + 27500/122500
Payback period = 3.22 years
Answer
Payback period :
Project F 2.48years
Project G 3.22 years
b)
Project F
Net present value = -140000+ 57500/1.1 + 52500/1.1^2 +62500/1.1^3 +57500/1.1^4 +52500/1.1^5
Net present value = $ 74,489.98
Project G
Net present value = -210000+ 37500/1.1 + 52500/1.1^2 +92500/1.1^3 +122500/1.1^4 +137500/1.1^5
Net present value = $ 106021.79
Answer
Net present value
Project F $ 74,489.98
Project G $ 106021.79
c) Which project should the company accept?
Project F
Since company has historically used a three-year cutoff for projects where Poject F has lower than 3 year
Year Project F Cummulative Project G Cummulative 0 -140000 -140000 -210000 -210000 1 57500 -82500 37500 -172500 2 52500 -30000 52500 -120000 3 62500 32500 92500 -27500 4 57500 90000 122500 95000 5 52500 142500 137500 232500Related Questions
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