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Consider the following information: Project Cash Flows ($) C0 C1 C2 C3 C4 A 5,000 1,000 1,000 3,000 0 B 1,000 0 1,000 2,000 3,000
Consider the following information:
| Project | Cash Flows ($) | ||||
|---|---|---|---|---|---|
| C0 | C1 | C2 | C3 | C4 | |
| A | 5,000 | 1,000 | 1,000 | 3,000 | 0 |
| B | 1,000 | 0 | 1,000 | 2,000 | 3,000 |
| C | 5,000 | 1,000 | 1,000 | 3,000 | 5,000 |
- What is the payback period on each of the above projects?
- Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?
- If you use a cutoff period of three years, which projects would you accept?
- If the opportunity cost of capital is 0.15, which projects have positive NPVs?
- If a firm uses a single cutoff period for all projects, it is likely to accept too many shortlived projects. True or false?
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Handbook Of Global Financial Markets
Authors: Sabri Boubaker, Duc Khuong Nguyen
1st Edition
9813236647, 978-9813236646
