Question
Pacific Printers has $1 million to invest in new projects next year. They must decide which of the following three mutually exclusive (only one can
Pacific Printers has $1 million to invest in new projects next year. They must decide which of the following three mutually exclusive (only one can be accepted) projects. The company has collected the following relevant information about the projects. The companys cost of capital is 12%.
| Annual cash flows | Project A | Project B | Project C |
|---|---|---|---|
| Initial investment | ($400,000) | ($600,000) | ($1,000,000) |
| Year 1 | $100,000 | $200,000 | $400,000 |
| Year 2 | $200,000 | $300,000 | $600,000 |
| Year 3 | $300,000 | $300,000 | $50,000 |
Required:
(a) What is the pay-back period of each project?
(b) Which projects the company should consider if it has a policy of not accepting any project with a pay-back period of more than 2 years?
(c) What is the present value of all cash inflows for each project?
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Development Finance In China Theory And Implementation Enrich Series On Development Finance In China Volume 1
Authors: Enrich Professional Publishing
1st Edition
9814298107, 9814298115, 9789814298117
