• Leslieischargedwithdeterminingwhichsmallprojectsshouldbefunded.Alongwiththisassignment,shehasbeengrantedtheuseof$15,000foramaximumoftwoyears.Sheisconsideringthreeprojects.ProjectAcosts$7,500andhascashflowsof$4,000ayearforYears1to3.ProjectBcosts$8,000andhascashflowsof$3,000,$4,000,and$3,000forYears1to3,respectively.ProjectCcosts$2,000andhasacashinflowof$2,500inYear2.Whatdecisionsshouldshemakeregardingtheseprojectsifsheassignsthemamandatorydiscountrateof8.5percent?Explainwhy.

accept either Projects A and C or Projects B and C, but not all three as there is insufficient financing

accept Project C and reject Projects A and B because only Project C has a discounted payback that is less than two years

accept Projects A and C and reject Project B as they have the shortest discounted payback periods than fit within the $15,000 allocation

accept Projects A and C and reject Project B as A and B payback within two years

accept Projects B and C and reject Project A as this combination uses the most initial capital

6.A project has an initial cost of $2,250. The cash inflows are $0, $500, $900, and $700 for Years 1 to 4, respectively. What is the payback period?

2.97 years

2.84 years

3.98 years

3.92 years

never

7.An investment project has an initial cost of $260 and cash flows $75, $105, $100, and $50 for Years 1 to 4, respectively. The cost of capital is 12 percent. What is the discounted payback period?

3.76 years

never

3.42 years

3.68 years

3.92 years

. Ginny is considering an investment costing $55,000 that has cash flows of $35,000 in Year 2, $36,000 in Year 3, and $5,000 in Year 4. Ginny requires a rate of return of 8 percent and has a required discounted payback period of three years. Based on the discounted payback method should she make this investment? All things considered, do you agree with this decision? Why or why not?

yes; because the NPV is positive and the project pays back on a discounted basis within the assigned time period

yes; but only because the discounted payback requirement is met

no; although the project earns more than 8 percent, there is no situation where the project can pay back on a discounted basis within three years

no; because the discounted payback period is too short

yes; discounted payback indicates acceptance but that is not a wise decision as the NPV is negative and the final cash outflow is ignored by payback