Q1

a)

Given the following cashflows for Project Omega, what is the payback period in years assuming the cashflows occur annually?

Year	Cashflows of Project Omega
0	-90,000
1	20,000
2	25,000
3	50,000
4	40,000
5	150,000

b)

Project X and Y. The following are the cash flows of two projects:

Year	Project X	Project Y
0	-100,000	-50,000
1	50,000	20,000
2	40,000	30,000
3	30,000	30,000
4	20,000
5	10,000

If the discount rate is 18% is the project with the highest profitability index also the one with the highest NPV?

Yes

No

c)

he cashflows for an investment in Factory X are listed below. Using the discounted payback method of capital budgeting, what is the payback period for this investment expressed in years, assuming that the cashflows occur annually and using a discount rate of 20%.

Year	Factory X
0	- 300,000
1	50,000
2	50,000
3	100,000
4	100,000
5	200,000
6	200,000