f What is the regular payback period for these two projects Project A Time period 0 1 2 3 4 5 6 7 Cash flow (375) (300) (200) (100) 600 $600 $926 ($200) Cumulative cash flow $375 $675 $875 $975 $375 $225 $1,151 $951 Intermediate calculation for payback 100 000 100 000 100 000 100 000 100 000 62 50 Payback using intermediate calculations 4 62 years Project B Time period 0 1 2 3 4 5 6 7 Cash flow $575 $190 $190 $190 $190 $190 $190 $0 Cumulative cash flow $575 $385 $195 $5 $185 $375 $565 $565 Intermediate calculation for payback 100 000 100 000 100 000 100 000 Payback using intermediate calculations Payback using PERCENTRANK Ok because cash flows follow normal pattern g At a cost of capital of 12 , what is the discounted payback period for these two projects WACC 12 Project A Time period 0 1 2 3 4 5 6 7 Cash flow $375 $300 $200 $100 $600 $600 $926 $200 Disc cash flow Disc cum cash flow Intermediate calculation for payback Payback using intermediate calculations Project B Time period 0 1 2 3 4 5 6 7 Cash flow Disc cash flow Disc cum cash flow Intermediate calculation for payback Payback using intermediate calculations Discounted Payback using PERCENTRANK 3 98 Ok because cash flows follow normal pattern h What is the profitability index for each project if the cost of capital is 12 PV of future cash flows for A $601 96 PI of A 1 61 PV of future cash flows for B $781 17 PI of B 1 36

Question

f  What is the regular payback period for these two projects  Project A Time period 0 1 2 3 4 5 6 7 Cash flow (375) (300) (200) (100) 600 $600 $926 ($200) Cumulative cash flow  $375  $675  $875  $975  $375 $225 $1,151 $951 Intermediate calculation for payback 100 000 100 000 100 000 100 000 100 000 62 50 Payback using intermediate calculations 4 62 years Project B Time period 0 1 2 3 4 5 6 7 Cash flow  $575 $190 $190 $190 $190 $190 $190 $0 Cumulative cash flow  $575  $385  $195  $5 $185 $375 $565 $565 Intermediate calculation for payback 100 000 100 000 100 000 100 000 Payback using intermediate calculations Payback using PERCENTRANK Ok because cash flows follow normal pattern  g  At a cost of capital of 12 , what is the discounted payback period for these two projects  WACC   12  Project A Time period 0 1 2 3 4 5 6 7 Cash flow  $375  $300  $200  $100 $600 $600 $926  $200 Disc  cash flow Disc  cum  cash flow Intermediate calculation for payback Payback using intermediate calculations Project B Time period 0 1 2 3 4 5 6 7 Cash flow Disc  cash flow Disc  cum  cash flow Intermediate calculation for payback Payback using intermediate calculations Discounted Payback using PERCENTRANK 3 98 Ok because cash flows follow normal pattern  h  What is the profitability index for each project if the cost of capital is 12   PV of future cash flows for A  $601 96 PI of A  1 61 PV of future cash flows for B  $781 17 PI of B  1 36

Accepted Answer

The Answer is in the image, click to view ...

Question

f. What is the regular payback period for these two projects? Project A Time period 0 1 2 3 4 5 6 7 Cash flow

Step by Step Solution

Step: 1

Get Instant Access with AI-Powered Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Students also viewed these Finance questions

Question

Question

Question

Question

Question

Question

Question

Question

Question

Question


f. What is the regular payback period for these two projects?

Project A
	Time period	0	1	2	3	4	5	6	7
	Cash flow	(375)	(300)	(200)	(100)	600	$600	$926	($200)
	Cumulative cash flow	-$375	-$675	-$875	-$975	-$375	$225	$1,151	$951
Intermediate calculation for payback	100.000	100.000	100.000	100.000	100.000	62.50
Payback using intermediate calculations	4.62 years

Project B
	Time period	0	1	2	3	4	5	6	7
	Cash flow	-$575	$190	$190	$190	$190	$190	$190	$0
	Cumulative cash flow	-$575	-$385	-$195	-$5	$185	$375	$565	$565
Intermediate calculation for payback	100.000	100.000	100.000	100.000
Payback using intermediate calculations
	Payback using PERCENTRANK		Ok because cash flows follow normal pattern.

g. At a cost of capital of 12%, what is the discounted payback period for these two projects?

WACC =	12%

Project A
	Time period	0	1	2	3	4	5	6	7
	Cash flow	-$375	-$300	-$200	-$100	$600	$600	$926	-$200
	Disc. cash flow
	Disc. cum. cash flow
Intermediate calculation for payback
Payback using intermediate calculations

Project B
	Time period	0	1	2	3	4	5	6	7
	Cash flow
	Disc. cash flow
	Disc. cum. cash flow
Intermediate calculation for payback
Payback using intermediate calculations
	Discounted Payback using PERCENTRANK	3.98	Ok because cash flows follow normal pattern.

h. What is the profitability index for each project if the cost of capital is 12%?

PV of future cash flows for A:		$601.96
PI of A:			1.61

PV of future cash flows for B:		$781.17
PI of B:			1.36