Question

Here are the expected cash flows for three projects:

Cash Flows (dollars) | ||||||||||||||||||||

Project | Year: | 0 | 1 | 2 | 3 | 4 | ||||||||||||||

A | − | 6,300 | + | 1,325 | + | 1,325 | + | 3,650 | 0 | |||||||||||

B | − | 2,300 | 0 | + | 2,300 | + | 2,650 | + | 3,650 | |||||||||||

C | − | 6,300 | + | 1,325 | + | 1,325 | + | 3,650 | + | 5,650 | ||||||||||

**a.** What is the payback period on each of the
projects?

**b.** If you use a cutoff period of 2 years, which
projects would you accept?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

**c.** If you use a cutoff period of 3 years, which
projects would you accept?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

**d-1.** If the opportunity cost of capital is 11%,
calculate the NPV for projects A, B, and C. **(Negative
amounts should be indicated by a minus sign. Do not round
intermediate calculations. Round your answers to 2 decimal
places.)**

**d-2.** Which projects have positive NPVs?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

**e.** "Payback gives too much weight to cash flows
that occur after the cutoff date." True or false?

Answer #1

a.

Project A payback period= 3 years as it first three years cash flows sum is equal to 6300 which is the investment amount.

Project B payback period= 2 years as it first two years cash flows sum is equal to 2300 which is the investment amount.

Project C payback period= 3 years as it first three years cash flows sum is equal to 6300 which is the investment amount.

b.

Project B is answer as it is the only project which has payback of 2 year

c.

Projects A, B, and C as all three comes under 3 years payback

d.1.

NPV of A=-6300+1325/1.11^1+1325/1.11^2+3650/1.11^3+0/1.11^4=-1362.06

NPV of B=-2300+0/1.11^1+2300/1.11^2+2650/1.11^3+3650/1.11^4=3908.76

NPV of C=-6300+1325/1.11^1+1325/1.11^2+3650/1.11^3+5650/1.11^4=2359.77

d.2.

Project B and Project C based on calculation in d.1.

e.

false

the above are the answers

Here are the expected cash flows for three projects:
Project Year 0 1 2 3
4
A -5,400 +1,100 +1,100
+3,200 0
B -1,400 0 +1,400
+2,200 +3,200
C -5,400 +1,100 +1,100
+3,200 +5,200
a. what is the payback period on each of the projects?
b. If you use a cutoff period of 2 years, which projects would
you accept?
c. If you use a cutoff...

Use the following mutually exclusive investment cash flows for
the question(s) below:
Project
Year 0
Year 1
Year 2
Year 3
A
-$200
$100
$100
$100
B
-$275
$125
$125
$125
Based on the payback criterion, which of the following is NOT
true?
Multiple Choice
With a payback cutoff of 2.5 years, both projects are
acceptable.
With a payback cutoff of 1.75 years, only Project A is
acceptable.
With a payback cutoff of three years, both projects are
acceptable.
With...

ABC Corporation is considering a project that provides the
following cash flows steam:
Year
0
1
2
3
4
5
Cash flows
-$1,000
$375
$425
$250
$110
$100
If WACC is 10%, what is NPV and should the company accept the
project?
Find IRR, MIRR, payback, and discounted payback period.
Considering the following projects.
Project
Year
0
1
2
3
4
A
Cash flows
-$100
$35
$35
$35
$35
B
Cash flows
-$100
$60
$50
$40
$30
Project A has...

1.-You are evaluating a project that will cost $499,000, but is
expected to produce cash flows of $123,000 per year for 10 years,
with the first cash flow in one year. Your cost of capital is 10.6%
and your company's preferred payback period is three years or
less.
a. What is the payback period of this project?
b. Should you take the project if you want to increase the value
of the company?
2.- You are choosing between two projects....

You've estimated the following cash flows (in $) for two
mutually exclusive projects:
Year
Project A
Project B
0
-5,600
-8,400
1
1,325
1,325
2
2,148
2,148
3
4,193
8,192
The required return for both projects is 8%.
Part 1 : What is the IRR for project A? 3+ Decimals
Part 2 What is the IRR for project B? 3+ Decimals
Part 3 Which project seems better according to the IRR method?
Project A or Project B
Part 4 What...

You've estimated the
following cash flows (in $) for two projects:
Year
Project A
Project B
0
-5,100
-7,650
1
1,325
1,325
2
2,148
2,148
3
3,444
6,967
The required return
for both projects is 8%.
What is the NPV for
project A?
What is the NPV for
project B?
Which project seems
better according to the NPV method?
Project A or Project B

What is the payback period on each of the following
projects?
Given that you wish to use the payback rule with a cutoff
period of three years, which projects would you accept?
Cash Flows, $
Project
C0
C1
C2
C3
C4
A
-10,000
+1,000
+1,000
+2,000
+6,000
B
-5,000
0
+1,000
+1,500
+3,000
C
-2,000
+2,000
+4,000
+1,000
+5,000

Year Project A Expected Cash Flows ($) 0 (1,250,000) 1 75,000 2
218,750 3 535,000 4 775,000 5 775,000 Year Project B Expected Cash
Flows ($) 0 (1,050,000) 1 650,000 2 500,000 3 226,250 4 137,500 5
62,500 Metrics Payback Period (in years) (A)3.54 (B)1.8 Discounted
payback period (in years) (A)4.58 (B)2.72 Net Present Value (NPV)
(A)$160,816 (B)$151,742 Internal Rate of Return (A)18.90% (B)23.84%
Profitability Index (A)1.13 (B)1.14 Modified Internal Rate of
Return (MIRR) (A)17.82% (B)18.15% a). Which of the...

Project S costs $19,000 and it's expected cash flows would be
$6500 per year for 5 years. Mutually exclusive Project L costs
$42,500 and it's expected cash flows would be $13,200 per year for
5 years. If both projects have a WACC of 15%, which project would
you recommend?
a. Project L, since NPVL > NPVs
b. Both projects S and L, since both projects have IRR's >
0.
c. Both projects S and L, since both projects have NPVs...

You've estimated the
following cash flows (in $) for two projects:
Year
Project A
Project B
0
-5,400
-8,100
1
1,325
1,325
2
2,148
2,148
3
3,942
7,751
The required return
for both projects is 8%.
A:What is the NPV for
project A?
B:What is the NPV for
project B?
C:Which project seems
better according to the NPV method?

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