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Here are the expected cash flows for three projects: Year: 4 Project A B C a - 5,500 1,500 5,500 Cash Flows (dollars) 1 2
Here are the expected cash flows for three projects: Year: 4 Project A B C a - 5,500 1,500 5,500 Cash Flows (dollars) 1 2 3 + 1,125 + 1,125 + 3,250 + 1,500 + 2,250 + 1,125 + 1,125 + 3,250 + 3,250 + 5,250 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? Project A 3 Years a. Payback period 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. 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? Project B Project C 2 Years 3 Years Project B Project A and Project C 3,503.49 $ 2,261.30 Project B and Project C False $ (1,197.04) $
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