Solved by verified expert:3.Calculating Payback. Global Toys Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?YearCash Flow (A)Cash Flow (B)0−$55,000−$ 95,0001 19,000 18,0002 27,000 26,0003 24,000 28,0004 9,000 260,000LO 24.Calculating AAR. You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $14 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,253,000, $1,935,000, $1,738,000, and $1,310,000 over these four years, what is the project’s average accounting return (AAR)?LO 35.Calculating IRR. A firm evaluates all of its projects by applying the IRR rule. If the required return is 11 percent, should the firm accept the following project?YearCash Flow0−$153,0001 78,0002 67,0003 49,000LO 46.Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9 percent, should the firm accept this project? What if the required return was 21 percent?
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