Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Here are the expected cash flows for three projects: Year: 4 Project A B 6,700 - 2,700 - 6,700 Cash Flows (dollars) 2 3 +
Here are the expected cash flows for three projects: Year: 4 Project A B 6,700 - 2,700 - 6,700 Cash Flows (dollars) 2 3 + 1,425 + 1,425 + 3,850 0 + 2,700 + 2,850 + 1,425 + 1,425 + 3,850 0 + 3,850 + 5,850 a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 11%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) d-2. Which projects have positive NPVS? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? X Answer is complete but not entirely correct. Proiect A Proiect R Proie 2. "Payback gives too much weight to cash flows that occur after the cutoit date.' True or Taise! Answer is complete but not entirely correct. Project A Projet Project B 2 Years a. 3 Years 3 b. Payback period If you use the payback rule with a cutoff period of 2 years, which projects will you accept? If you use a cutoff period of 3 years, which projects will you accept? If the opportunity cost of capital is 11%, calculate the NPV for projects A, B, and C. $ c. d- 1. d- 2. (1,301.41) 3,703.96 $ Which projects have positive NPVs? Project B and e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false
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