1. Beckon Health is reviewing a new project that costs $482,500 and has expected net cash inflows of $91,250 per year for 7 years. The first inflow occurs one year after the cost outflow and the project has a cost of capital of 12%. What is the projects payback in years?

2. The manager of capital budgeting for Little Rock Health System has estimated the following cash flow of dollars for a proposed new clinical service. The project's cost of capital is 10%.

Year Expected net cash flow Cumulative Cash Flows

0 ($100,000) a.

1 $70,000 b.

2 $50,000 c.

3 $20,000

Complete letters a, b, and c, showing your calculations.

d. What is the payback period?

You will have four answers to this question (a, b, c and d).