# Calculation of Pay back period, Net present value

Please see attachment.

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?

https://brainmass.com/business/net-present-value/calculation-of-pay-back-period-net-present-value-221024

#### Solution Preview

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