Question
Here are the expected cash flows for 3 projects: Project years 0 1 2 3 4 a (-$5,000) $1,000 $1,000 $3,000 $0 b (-$1,000) $0
Here are the expected cash flows for 3 projects:
Project | years | 0 | 1 | 2 | 3 | 4 |
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 |
A.What is the payback period on each of the projects?
B.If you use the payback rule with a cutoff period of twe years, which projects will you accept?
C.If you use a cutoff period of three years, Which projects wil you accept?
d.If the opportunity cost of capital is 10%, which projects have positive NPVs?
e."Payback" gives too much weight to cash flows that occcur after the cutoff date." True or false
plz show work thank you
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started