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    Computing Net Present Value and Payback Period

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    NEIL CORPORATION HAS 3 PROJECTS UNDER CONSIDERATION. THE CASH FLOWS FOR EA ITEM IS SHOWN. THE FIRM HAS 16% COST OF CAPITAL. All projects has a initial investment of $40,000.

    CASH FLOWS
    Project A PROJECT B PROJECT C

    1ST YEAR $13,000 $7,000 $19,000
    2ND " " $13,000 $10,000 $16,000
    3RD "" $13,OOO $13,O00 $13,000
    4T0 "" $13,000 $16,000 $10,000
    5TH "" $13,000 $19,000 $7,000

    A. CALCULATE THE PAYBACK PERIOD. WHICH IS PREFERRED ACCORDING TO THIS METHOD?
    B. CALCULATE EACH PROJECT NPV. WHICH PROJECT IS PREFERRED ACCORDING TO THIS METHOD?
    C. COMMENT ON YOUR FINDINGS IN PARTS A AND B RECOMMEND THE BEST PROJECT. EXPLAIN YOUR RECOMMENDATIONS.

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    https://brainmass.com/business/capital-budgeting/computing-net-present-value-payback-period-258495

    Solution Preview

    Because Project C provides both the fastest expected payback of ...

    Solution Summary

    Using an Excel 97-2003 spreadsheet, this solution illustrates the computation and comparison of the net present value of a project and its payback period.

    $2.19

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