Question
Jess Lawson is the CFO for ABC Co. She is looking at five projects for potential investment in the second half of Year 1. She
Jess Lawson is the CFO for ABC Co. She is looking at five projects for potential investment in the second half of Year 1. She has asked her senior analyst, Eric Whitelaw, to review the projects to determine which ones the company should pursue. Jess has provided two scenarios to Eric, along with the estimated cash flows for each project and appropriate discount rates. Using the information provided in the exhibits, complete the table below. In column A, calculate the payback period In column B. Use all four decimals for the factors and round all final calculations to two decimal places.
Payback period
A | B |
Project | Payback Period (In years) |
1 |
|
2 |
|
3 |
|
4 |
|
5 |
|
Present Value of $1
Discount Rates | |||||
Years | 5% | 5.50% | 6% | 6.5% | 7% |
1 | 0.9524 | 0.9479 | 0.9434 | 0.9390 | 0.9346 |
2 | 0.9070 | 0.8985 | 0.8900 | 0.8817 | 0.8734 |
3 | 0.8638 | 0.8516 | 0.8396 | 0.8278 | 0.8163 |
4 | 0.8227 | 0.8072 | 0.7921 | 0.7773 | 0.7629 |
5 | 0.7835 | 0.7651 | 0.7473 | 0.7299 | 0.7130 |
6 | 0.7462 | 0.7252 | 0.7050 | 0.6853 | 0.6663 |
Present Value of an Ordinary Annuity of $1
Discount Rates | |||||
Years | 5% | 5.50% | 6% | 6.5% | 7% |
1 | 0.9524 | 0.9479 | 0.9434 | 0.9390 | 0.9346 |
2 | 1.8594 | 1.8464 | 1.8334 | 1.8207 | 1.8080 |
3 | 2.7232 | 2.6980 | 2.6730 | 2.6485 | 2.6243 |
4 | 3.5459 | 3.5052 | 3.4651 | 3.4258 | 3.3872 |
5 | 4.3294 | 4.2703 | 4.2124 | 4.1557 | 4.1002 |
6 | 5.0756 | 4.9955 | 4.9174 | 4.8410 | 4.7665 |
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