JC Warehouse Corporation has estimated the cash flows of Projects A, B, and C as follows. 

 

Year	Project Alpha	Project Beta	Project Delta
0	-$100,000	-$200,000	-$100,000
1	70,000	130,000	75,000
2	70,000	130,000	60,000

 

Suppose the company requires a 12 percent return on investment.

1.1 Calculate the payback period for each of the three projects.

1.2 Calculate the NPV for each of the three projects.

1.3 Calculate the profitability index for each of the three projects.

1.4 Suppose these three projects are independent and the company has an unlimited amount of funds. If the company makes decision based on the payback period criterion, which projects (s) should the company accept? Note that the cutoff point for the payback period is 2 years.

1.5 Suppose these three projects are mutually exclusive. If the company makes a decision based on the profitability index criterion, which project(s) should the company accept?

1.6 Suppose the company has a $300,000 budget for long-term investment. The projects are not divisible. If the company makes decisions based on the NPV criterion, which project(s) should the company accept?