Capital Investment Analysis

2. Data for three projects under review follow:

Project Year 0 Year 1 Year 2 Year 3 Year 4

A -$5,000 $1,000 $1,000 $3,000 -

B -$1,000 - $1,000 $2,000 $3,000

C -$5,000 $1,000 $1,000 $3,000 $5,000

(a) What is the payback period on each of the following projects?

(b) Which of the above project(s) is/are acceptable if the stipulated acceptable

payback period is 2 years?

(c) Assuming the opportunity cost of capital is 10%, which of the above project(s) is

acceptable under the NPV method?