Cepeda Manufacturing Company Is Considering Three New Projects, Each Requiring

question 134

Essay

Cepeda Manufacturing Company is considering three new projects, each requiring an equipment investment of $20,000. Each project will last for 3 years and produce the following cash inflows.
The equipment's salvage value is zero. Cepeda uses straight-line depreciation. Cepeda will not accept any project with a payback period over 2 years. Cepeda's minimum required rate of return is 12%.
Instructions
(a) Compute each project's payback period, indicating the most desirable project and the least desirable project using this method. (Round to two decimals.)
(b) Compute the net present value of each project. Does your evaluation change? (Round to nearest dollar.)

Distinguish between personal property and other categories under home insurance.

Understand the concept of speculative risk in the context of starting a small business.

Grasp the principle of financial responsibility laws and their purpose in automobile insurance.

Understand different strategies for managing risks, including avoidance, reduction, assumption, and shifting.

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Definitions:

Return

In finance, it refers to the profit or loss made on an investment over a specified period, expressed as a percentage of the initial investment.

Common Stockholders' Equity

The portion of a company's equity that is attributable to common stockholders, calculated as total assets minus total liabilities minus preferred stock equity.

Inventory Turnover

Inventory turnover is a measure of how frequently a company sells and replaces its stock of goods within a certain period, indicating the efficiency of inventory management.

Inventory Management

The process of ordering, storing, using, and selling a company's inventory, which includes both raw materials and finished goods.