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 percent, which projects have a positive NPV?
b. Calculate the payback period for each project.
c. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?
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 percent, which projects have a positive NPV?
b. Calculate the payback period for each project.
c. Which project(s) would a firm using the payback rule accept if the cutoff period is three ...
Solution Summary
The answer contains the computation of pay back period and Net present value
...Calculate the Internal Rate of Return of each of ... Income after tax $2,640 Add back: Depreciation $20,000 ... Cumulative cash flows $22,640 Payback period 4 years ...
... B. CALCULATE EACH PROJECT NPV. ... this solution illustrates the computation and comparison of the net present value of a project and its payback period. Part A. ...
... that can be used with calculations, any other ... The solution calculates payback periods, returns on average ...Payback period = Initial cost Net annual cash flows. ...
Calculate payback period, discount rate, NPV, IRR for 3 possible ... 1. What is the Payback Period for each project? ... is 10.5%, What is the Net Present Value for ...
... Illustrates how to calculate the pre-tax and post ... cash flows, accounting rate of return, payback period, internal rate of return and net present value for ...
... Do not round intermediate calculations and round your ... cash flows and compute a project's net present value, and how to compute a project's payback period. ...
... end of final payback year - Total Paid back at the ... For the example: Payback Period = 2 + ($150 - $120 ...Payback calculation ordinarily does not recognize the time ...
