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INVESTMENT A INVESTMENT B INVESTMENT C Cash flow Probability Cash flow Probability Cash flow Probability $3,000 0.10 $2,000 p.10 $1,000 0.10 4,000 0.25 3,000 0.25

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INVESTMENT A INVESTMENT B INVESTMENT C Cash flow Probability Cash flow Probability Cash flow Probability $3,000 0.10 $2,000 p.10 $1,000 0.10 4,000 0.25 3,000 0.25 2,000 0.25 5,000 0.30 4,000 0.30 3,000 0.30 6,000 0.25 5,000 0.25 4,000 0.25 7,000 0.10 6,000 0.10 5,000 0.10 2). The Jackson corporation is considering 3 investment proposals above A,B and C. Each investment cost $10,000 each, will last 5 years, and will generate the following cash flows. The company cost of capital to the company is 10%. a. Calculate the Payback period for each proposed investment. (show your work) (10pts) b. Calculate the Net Present Value (NPV) for each proposal. Which investment alternative should be chosen? (10pts)

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