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B: Payback = 3 + ($5,000 / $270,000) = 3.019 years. Using the payback criterion and a cutoff of 3 years, accept project A and reject project B. 4. When we use Chapter 9 Capital Budgeting Techniques Solutions to Problems Note to instructor: In most problems involving. 222 Part 3 Long-Term Investment Decisions P9-3. CAPITAL BUDGETING PROBLEMS: CHAPTER 10 Answers to Warm-Up Exercises E10-1. Payback period Answer: The payback period for Project Hydrogen is 4.29 years. Solution. Payback Period. = Initial Investment ÷ Annual Cash Flow. = $105M ÷ $25M. = 4.2 years. Example 2: The Delta company is planning to purchase a (i) Pay-back period (ii) Net Present Value and (iii) Internal Rate of Return. Solution: (i) Payback Period: Initial outlay. = Rs. 40,000. weakness in the payback method. 2. Return on original Investment (ROI):. Solution Problem: A process needs a pump, and the need will exist for a. Test your understanding with practice problems and step-by-step solutions. Browse through all study tools. Question & Answers (1,823).A project cost. @12%p.a. but before tax of 50%. Solution : 5,00,000 and yields annually a profit of ₹80,000 after depreciation. Calculate the pay back