Question: Consider the following mutually exclusive projects: Amounts are expressed in thousands of dollars and correspond to the cash flows expected to occur at the end

Consider the following mutually exclusive projects: Period Project 1 Project 2 Project 3 0123 -6,800 -6,800 -6,800 0

Amounts are expressed in thousands of dollars and correspond to the cash flows expected to occur at the end of each period. Period 0 is today, period 1 is one year from today, and so on.

a. Which project should be undertaken according to their payback period?

b. Which project should be undertaken according to their NPV if the discount rate is 10 percent?

c. Which project should be undertaken according to their NPV if the discount rate is 15 percent?

d. Which project has the highest IRR?

Period Project 1 Project 2 Project 3 0123 -6,800 -6,800 -6,800 0 3,740 2,040 0 3,740 3,400 12,920 3,740 6,568

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