2. Payback Consider the following projects: Cash Flows ($) Project Co C3 C4 C5 A -1,000...

 

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2. Payback Consider the following projects: Cash Flows ($) Project Co C3 C4 C5 A -1,000 +1,000 B -2,000 +1,000 +1,000 +4,000 +1,000 +1,000 -3,000 +1,000 +1,000 0 +1,000 +1,000 a. If the opportunity cost of capital is 10%, which projects have a positive NPV? b. Calculate the payback period for each project. c. Which project(s) would a firm using the payback rule accept if the cutoff period is three years? d. Calculate the discounted payback period for each project. e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period is three years? 2. Payback Consider the following projects: Cash Flows ($) Project Co C3 C4 C5 A -1,000 +1,000 B -2,000 +1,000 +1,000 +4,000 +1,000 +1,000 -3,000 +1,000 +1,000 0 +1,000 +1,000 a. If the opportunity cost of capital is 10%, which projects have a positive NPV? b. Calculate the payback period for each project. c. Which project(s) would a firm using the payback rule accept if the cutoff period is three years? d. Calculate the discounted payback period for each project. e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period is three years?

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Answers a A NPV 1000 100011 9091 B NPV 2000 100011 10... View the full answer