8% for project 1,2 &3

Capital Budgeting Exercises: Three independent projects are under consideration for capital budgeting purposes. Their respective initial investment, cost of capital, and cash flows are provided below. Use the following capital budgeting techniques to evaluate all three projects and indicate which project should be undertaken, assuming there is no budget constraint: A. Payback period method B Discounted payback period method Net present value method D. IRR method C. Project 1 Project 2 Project 3 $120,000 $130,000 $150,000 Initial Investment Cost of Capital Target payback 8ABX 4 years 14681 4 years 18 4 years period Year 1 Year 2 Year 3 Year 4 Year 5 $30,000 30,000 30,000 35,000 35.000 Cash flows $33,000 33,000 33,000 30,000 30,000 $35,000 35,000 45,000 45,000 45,000 Capital Budgeting Spreadsheet Example ASSIGNMENT # Answer Sheet for Capital Budgeting Exercises From Previous Page Project 1 Project 2 Project 3 Which project() should be accepted? Payback period Discounted payback period NPV IRR