The Dilemma at Day-Pro
1. Calculate the Payback Period of each project. Explain what argument Tim should make to show that the Payback Period is not appropriate in this case.
Answer :
Year Synthetic Resin Epoxy Resin Cash Flows Cumulative Cash Flows Cash Flows Cumulative Cash Flows
0 -$1,000,000 -$1,000,000 -$800,000 -$800,000
1 $350,000 -$650,000 $600,000 -$200,000
2 $400,000 -$250,000 $400,000 $200,000
3 $500,000 $250,000 $300,000 $500,000
4 $650,000 $900,000 $200,000 $700,000
5 $700,000 $1,600,000 $200,000 $900,000
Payback period for synthetic resin =
Payback period for epoxy resin =
Payback period tidak sesuai digunakan sebagai bahan pertimbangan untuk investasi skala besar seperti investasi membangun manufaktur thermosetting resin karena payback period tidak memperhitungkan time value of money dan tidak memperhitungkan cash flow yang diterima setelah payback period. Payback period hanya cocok digunakan untuk perusahaan kecil atau perusahaan yang ingin berinvestasi dalam skala kecil dengan prioritas perolehan likuiditas secepat mungkin.
2. Calculate the Discounted Payback Period (DPP) using 10% as the discount rate. Should Tim ask the Board to use DPP as the deciding factor? Explain.
Answer :
Year Synthetic Resin Epoxy Resin Undiscounted Cash Flows PVIF Discounted Cash Flows Cumulative Discounted Cash Flows Undiscounted Cash Flows PVIF Discounted Cash Flows Cumulative Discounted Cash Flows
0 -$1,000,000 1.000 ($1,000,000) ($1,000,000) -$800,000 1.000 ($800,000) ($800,000)
1 $350,000 0.909 $318,182 ($681,818) $600,000 0.909 $545,455 ($254,545)
2 $400,000 0.826 $330,579 ($351,240) $400,000 0.826 $330,579 $76,033
3 $500,000 0.751 $375,657 $24,418 $300,000 0.751 $225,394 $301,427
4 $650,000 0.683 $443,959 $468,376 $200,000 0.683 $136,603 $438,030
5 $700,000 0.621 $434,645 $903,021 $200,000 0.621 $124,184 $562,214
DPP for synthetic resin =
DPP for epoxy resin =
Sama seperti halnya dengan model payback period, DPP tidak sesuai
Answer :
Year Synthetic Resin Epoxy Resin Cash Flows Cumulative Cash Flows Cash Flows Cumulative Cash Flows
0 -$1,000,000 -$1,000,000 -$800,000 -$800,000
1 $350,000 -$650,000 $600,000 -$200,000
2 $400,000 -$250,000 $400,000 $200,000
3 $500,000 $250,000 $300,000 $500,000
4 $650,000 $900,000 $200,000 $700,000
5 $700,000 $1,600,000 $200,000 $900,000
Payback period for synthetic resin =
Payback period for epoxy resin =
Payback period tidak sesuai digunakan sebagai bahan pertimbangan untuk investasi skala besar seperti investasi membangun manufaktur thermosetting resin karena payback period tidak memperhitungkan time value of money dan tidak memperhitungkan cash flow yang diterima setelah payback period. Payback period hanya cocok digunakan untuk perusahaan kecil atau perusahaan yang ingin berinvestasi dalam skala kecil dengan prioritas perolehan likuiditas secepat mungkin.
2. Calculate the Discounted Payback Period (DPP) using 10% as the discount rate. Should Tim ask the Board to use DPP as the deciding factor? Explain.
Answer :
Year Synthetic Resin Epoxy Resin Undiscounted Cash Flows PVIF Discounted Cash Flows Cumulative Discounted Cash Flows Undiscounted Cash Flows PVIF Discounted Cash Flows Cumulative Discounted Cash Flows
0 -$1,000,000 1.000 ($1,000,000) ($1,000,000) -$800,000 1.000 ($800,000) ($800,000)
1 $350,000 0.909 $318,182 ($681,818) $600,000 0.909 $545,455 ($254,545)
2 $400,000 0.826 $330,579 ($351,240) $400,000 0.826 $330,579 $76,033
3 $500,000 0.751 $375,657 $24,418 $300,000 0.751 $225,394 $301,427
4 $650,000 0.683 $443,959 $468,376 $200,000 0.683 $136,603 $438,030
5 $700,000 0.621 $434,645 $903,021 $200,000 0.621 $124,184 $562,214
DPP for synthetic resin =
DPP for epoxy resin =
Sama seperti halnya dengan model payback period, DPP tidak sesuai