Q1
a)
Given the following cashflows for Project Omega, what is thepayback period in years assuming the cashflows occur annually?
| Year | Cashflows of Project Omega |
| 0 | -90,000 |
| 1 | 20,000 |
| 2 | 25,000 |
| 3 | 50,000 |
| 4 | 40,000 |
| 5 | 150,000 |
b)
Project X and Y. The following are the cash flows of twoprojects:
| Year | Project X | Project Y |
| 0 | -100,000 | -50,000 |
| 1 | 50,000 | 20,000 |
| 2 | 40,000 | 30,000 |
| 3 | 30,000 | 30,000 |
| 4 | 20,000 | |
| 5 | 10,000 | |
If the discount rate is 18% is the project with the highestprofitability index also the one with the highest NPV?
Yes
No
c)
he cashflows for an investment in Factory X are listed below.Using the discounted payback method of capital budgeting, what isthe payback period for this investment expressed in years, assumingthat the cashflows occur annually and using a discount rate of20%. Â
| Year | Factory X |
| 0 | -Â Â Â Â Â Â Â 300,000 |
| 1 | Â Â Â Â Â Â Â Â Â Â Â 50,000 |
| 2 | Â Â Â Â Â Â Â Â Â Â Â 50,000 |
| 3 | Â Â Â Â Â Â Â Â Â 100,000 |
| 4 | Â Â Â Â Â Â Â Â Â 100,000 |
| 5 | Â Â Â Â Â Â Â Â Â 200,000 |
| 6 | Â Â Â Â Â Â Â Â Â 200,000 |
