Comparing payback period and discounted payback period. Nielsen, Inc. is switching from the payback period to the discounted payback period for small-dollar projects. The cutoff period will remain at three years. Given the following four projects' cash flows, LOADING..., and using a discount rate of %, determine which projects it would have accepted under the payback period and which it will now reject under the discounted payback period. Which projects that would have been accepted under payback period method will now be rejected under the discounted payback period method?

Question Completion:

Given the following four projects' cash flows, and using a discount rate of 10%, ...

                                project 1          project 2         project 3         project 4  

Cost                        $10,000           $15,000          $8,000           $18,000  

Cash Flow Year 1      4,000               7,000             3,000             10,000  

Cash Flow Year 2     4,000              5,500             3,500              11,000  

Cash Flow Year 3     4,000              4,000             4,000                0

Determination of Projects Acceptance under Payback Period and NPV:

                             Payback Period           NPV

Project 1                  Accepted                 Rejected

Project 2                 Accepted                 Rejected

Project 3                 Accepted                 Accepted

Project 4                 Accepted                 Accepted

Explanation:

1. Data and Calculations:

                              project 1          project 2         project 3         project 4  

Cost                        $10,000           $15,000          $8,000           $18,000  

Cash Flow Year 1      4,000               7,000             3,000             10,000  

Cash Flow Year 2     4,000              5,500             3,500              11,000  

Cash Flow Year 3     4,000              4,000             4,000                0

Total inflows         $12,000           $16,500         $10,500           $21,000

Discount rate = 10%

Payback period       Year 3               Year 3            Year 3            Year 2

2. Discount factors: Year 1 = 0.909; Year 2 = 0.826; and Year 3 = 0.751

3. PV of Cash Flows:

                               project 1          project 2         project 3         project 4  

Cost                        $10,000           $15,000          $8,000            $18,000  

Cash Flow Year 1      3,636               6,363             2,727               9,090  

Cash Flow Year 2     3,304               4,543             2,891                9,086

Cash Flow Year 3     3,004              3,004              3,004                0

Total PV inflow       $9,944           $13,910            $8,622             $18,176

4. NPV                        ($56)           ($1,090)              $622                 $176

5. Nielsen, Inc.'s payback period is the number of years (or length of time) it takes an investment to reach its break-even point (the point where there is no gain or loss).    Nielsen's NPV is the difference between total cash inflows and cash outflows over some periods.  A positive NPV  for Nielsen shows that the projects should be accepted, while a negative NPV points to some underlying problems with the projects, especially with respect to cash inflows and outflows.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi