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Consider the following information: Project Cash Flows ($) C00 C11 C22 C33 C44 A 5,000 1,000 1,000 3,000 0 B 1,000 0 1,000 2,000 3,000
Consider the following information:
| Project | Cash Flows ($) | ||||
|---|---|---|---|---|---|
| C00 | C11 | C22 | C33 | C44 | |
| 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 0.20, 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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Economics Of Money Banking And Financial Markets
Authors: Frederic Mishkin
10th Global Edition
0273765736, 978-0273765738
