1. Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,000 1,000 1,000 3,000 0 B –1,000 0 1,000 2,000 3,000 C –5,000 1,000 1,000 3,000 5,000 a. What is the payback period on each of the above projects? b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept? Project A and Project B Project A, Project B, and Project C Project B Project B and Project C Project C Project A Project A and Project C c. If you use a cutoff period of three years, which projects would you accept? Project A and Project B Project C Project A Project A and Project C Project A, Project B, and Project C Project B and Project C Project B d. If the opportunity cost of capital is 10%, which projects have positive NPVs? Project A and Project B Project A Project A, Project B, and Project C Project A and Project C Project C Project B and Project C Project B 2. You have the chance to participate in a project that produces the following cash flows: Cash Flows ($) C0 C1 C2 5,000 4,000 –11,000 a. The internal rate of return is 13.6%. If the opportunity cost of capital is 10%, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) 3. Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A -1,000 1,000 0 0 0 0 B -2,000 1,000 1,000 4,000 1,000 1,000 C -3,000 1,000 1,000 0 1,000 1,000 a. If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Positive NPV project(s) Project A Project B Project C Projects A and B Projects A and C Projects B and C Projects A, B, and C No project b. Calculate the payback period for each project: (Round your answers to the nearest whole number. If a project never pays back, enter “0”.) Project A year(s) Project B year(s) Project C year(s) c. Which project(s) would a firm using the payback rule accept if the cutoff period were three years? Project(s) accepted d. Calculate the discounted payback for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places. If a project never pays back, enter “0”.) Project A year(s) Project B year(s) Project C year(s) e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years?
1. Consider the following information:
| Cash Flows ($) | |||||
| Project | C0 | C1 | C2 | C3 | C4 |
| A | –5,000 | 1,000 | 1,000 | 3,000 | 0 |
| B | –1,000 | 0 | 1,000 | 2,000 | 3,000 |
| C | –5,000 | 1,000 | 1,000 | 3,000 | 5,000 |
a. What is the payback period on each of the above projects?
b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?
| Project A and Project B |
| Project A, Project B, and Project C |
| Project B |
| Project B and Project C |
| Project C |
| Project A |
| Project A and Project C |
c. If you use a cutoff period of three years, which projects would you accept?
| Project A and Project B |
| Project C |
| Project A |
| Project A and Project C |
| Project A, Project B, and Project C |
| Project B and Project C |
| Project B |
d. If the opportunity cost of capital is 10%, which projects have positive NPVs?
| Project A and Project B |
| Project A |
| Project A, Project B, and Project C |
| Project A and Project C |
| Project C |
| Project B and Project C |
| Project B2. You have the chance to participate in a project that produces the following cash flows: Cash Flows ($)C0C1C25,0004,000–11,000 a. The internal rate of return is 13.6%. If the opportunity cost of capital is 10%, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)3. Consider the following projects: Cash Flows ($)ProjectC0C1C2C3C4C5A-1,0001,0000000B-2,0001,0001,0004,0001,0001,000C-3,0001,0001,00001,0001,000 a. If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Positive NPV project(s)Project AProject BProject CProjects A and BProjects A and CProjects B and CProjects A, B, and CNo project b. Calculate the payback period for each project: (Round your answers to the nearest whole number. If a project never pays back, enter “0”.) Project A year(s)Project B year(s)Project C year(s) c. Which project(s) would a firm using the payback rule accept if the cutoff period were three years? Project(s) accepted d. Calculate the discounted payback for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places. If a project never pays back, enter “0”.) Project A year(s)Project B year(s)Project C year(s) e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years? |
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