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  3. consider the following projects: cash flows ($

Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A ?2,800 2,800 0 0 0 0 B ?5,600 2,800 2,800 5,800 2,800 2,800 C ?7,000 2,800 2,500 0 2,800 2,800 If the opportunity cost of capital is 12%, which project(s) have a...

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Question

Finance

Consider the followingprojects:

Cash Flows ($)
ProjectC0C1C2C3C4C5
A?2,8002,8000000
B?5,6002,8002,8005,8002,8002,800
C?7,0002,8002,50002,8002,800

  1. If the opportunitycost of capital is 12%, which project(s) have a positive NPV?

    Positive NPV Projects

  2. Calculate the paybackperiod for each project.

    Project Ayears
    Project B   years
    Project C   years

  3. Which project(s) woulda firm using the payback rule accept if the cutoff period is threeyears?

    Project accepted  

  4. Calculate thediscounted payback period for each project.

    Project A   years
    Project B   years
    Project Cyears

  5. Which project(s) woulda firm using the discounted payback rule accept if the cutoffperiod is three years?

    Project accepted

Answer & Explanation Solved by verified expert
4.2 Ratings (888 Votes)
a Calculation of NPV Project A Year Cashflow PVF12 CashflowPVF 0 2800 1 280000 1 2800 08929 250000 NPV PV of Inflows PV of OUtflows 25002800 300 Project B Year Cashflow PVF12 CashflowPVF 0 5600 1 560000 1 2800 08929 250000 2 2800 07972 223214 3 5800 07118 412833 4 2800 06355 177945 5 2800 05674 158880 NPV PV of Inflows PV of OUtflows 25002232144128331779451588805600 12228715600 662871 Project C Year Cashflow    See Answer
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Transcribed Image Text

Consider the followingprojects:Cash Flows ($)ProjectC0C1C2C3C4C5A?2,8002,8000000B?5,6002,8002,8005,8002,8002,800C?7,0002,8002,50002,8002,800If the opportunitycost of capital is 12%, which project(s) have a positive NPV?Positive NPV ProjectsCalculate the paybackperiod for each project.Project AyearsProject B   yearsProject C   yearsWhich project(s) woulda firm using the payback rule accept if the cutoff period is threeyears?Project accepted  Calculate thediscounted payback period for each project.Project A   yearsProject B   yearsProject CyearsWhich project(s) woulda firm using the discounted payback rule accept if the cutoffperiod is three years?Project accepted

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