Suppose that you are considering two investment alternatives: A and B and would like to compute the payback period for each of these alternatives. The cash flow profiles for each alternative are given below. Use this information to answer the following questions.

EOY	A	B
0	-8000	-15000
1	2500	3000
2	2500	3000
3	500	7000
4	2500	3000
5	2500	3000
6	2500	6000

Question a:

For alternative B, compute the cumulative CFs and find the value of X, Y, Z. (No commas for the blanks)

EOY	B	Cumulative CFB
0	-15000
1	3000
2	3000	X
3	7000	Y
4	3000
5	3000
6	6000	Z

Question b:

What is the PBP for alternative B? Give your answer to the nearest hundredth. For example, if you get 10.238, enter 10.24; if you get 10.2, enter 10.20

Question c:

Which project would you select based on PBP? (A or B)

A

B

Question d:

Now for selecting between the alternatives, assume an interest rate of 10%. Find the value of P, Q, R, S describing CFA. Round to the nearest integer. (No commas for the blanks)

EOY	Net CFA	Discounted Net CFA	Discounted cumulative CFA
0	-8000	P
1	2500
2	2500	Q	R
3	500
4	2500		S
5	2500
6	2500

Question e:

What is the DPBP for alternative A? Give your answer to the nearest hundredth. For example, if you get 10.238, enter 10.24; if you get 10.2, enter 10.20.

Question f:

Based on DPBP, which alternative would you choose?

A

B

Question g:

Calculate PW_A of 10%. Round to the nearest integer.

Question h:

Calculate PW_B of 10%. Round to the nearest integer

Question i:

Based on PW, which alternative would you choose?