Payback, NPV
Not what you're looking for?
The cash flows from two capital expenditure projects are shown below. The discount rate is 10%.
Project A Project B
Initial cost $(10,000) $(10,000)
Year 1 6,000 2,000
Year 2 5,000 4,000
Year 3 1,000 8,000
Year 4 0 16,000
A. What are the payback periods for both projects?
B. What is the NPV for both projects?
C. What are the drawbacks from using payback as a method for selecting projects?
Purchase this Solution
Solution Summary
Calculates Payback period and NPV of two projects and explains the drawbacks from using payback as a method for selecting projects.
Solution Preview
Please see attached file:
Payback versus NPV
The cash flows from two capital expenditure projects are shown below. The discount rate is 10%.
Project A Project B
Initial cost ($10,000) ($10,000)
Year 1 6,000 2,000
Year 2 5,000 4,000
Year 3 1,000 8,000
Year 4 0 16,000
A. What are the payback periods for both projects?
Payback Period
Payback period is the number of years in which the initial investment is recouped
Payback = Year before full recovery + (unrecovered cost at start of year/Cash Flow during year)
Project ...
Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Motivation
This tests some key elements of major motivation theories.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.