I need help with the attached assignment please i need to know how to calculate payback period and discounted payback period

ASSIGNMENT #2 Question 1 A company has two projects to choose from with the following annual after-tax cash flows: Project A Year 0 Year 1 Years 28 - $700,000 - $400,000 $600,000 Project B Year 0 Years 18 - $1,600,000 $750,000 sh is ar stu ed d vi y re aC s ou ou rc rs e eH w er as o. co m The firm's cost of capital is 15 percent. Compute both projects' payback period and discounted payback period. (4 marks) Question 2 The R.M. Company uses the following risk-adjusted discount rates for capital budgeting purposes: Investments in new product lines 16% Substitution of labour with capital (machinery) 10% Expansion of existing product lines 12% Replacement of existing equipment 8% The firm has $500,000 of available capital for investment. Project A involves the production of a brand new product line. Project B involves the replacement of existing machinery. Project C involves the purchase of a more sophisticated piece of equipment as a replacement for existing machinery. This more sophisticated machine will enable R.M. Company to reduce the size of its workforce. There are no other projects available at this time. Expected cash flows for these independent projects are as follows: Projects Th A Investment (t=0) B (in thousands of dollars) C - 400 - 500 - 100 160 150 140 130 130 150 180 210 30 40 50 60 Net after-tax cash inflows (t=1) (t=2) (t=3) (t=4) Which project(s) would you recommend the company undertake? Show your calculations and provide any necessary explanations. (4 marks) https://www.coursehero.com/file/11502975/Assignment2/ 1 Question 3 A company has $20 million available to invest in new projects. There are three independent projects that it is considering. The after-tax cash flows of the projects are as follows: Project Investment Required A B C Year 1 cash flow -20 million -10 million -10 million Year 2 cash flow 20 million 8 million 6 million 10 million 7 million 10 million sh is ar stu ed d vi y re aC s ou ou rc rs e eH w er as o. co m Calculate the IRR, PI and NPV of each of the two-year projects and recommend which project(s) the company should invest in (and why). The company's cost of capital is 15%. (4 marks) Th ONLY SUBMIT PAGES 3-5. https://www.coursehero.com/file/11502975/Assignment2/ 2 ASSIGNMENT #2 (12 marks) Name (Last, First):______________________________ Student #:_____________________ Question 1 (4 marks) Payback Period: PROJECT A sh is ar stu ed d vi y re aC s ou ou rc rs e eH w er as o. co m PROJECT B Th Discounted Payback Period: PROJECT A PROJECT B https://www.coursehero.com/file/11502975/Assignment2/ 3 Th sh is ar stu ed d vi y re aC s ou ou rc rs e eH w er as o. co m Question 2 (4 marks) https://www.coursehero.com/file/11502975/Assignment2/ 4 Question 3 (4 marks) IRR PI NPV Project A Th Project C sh is ar stu ed d vi y re aC s ou ou rc rs e eH w er as o. co m Project B https://www.coursehero.com/file/11502975/Assignment2/ Powered by TCPDF (www.tcpdf.org) 5