The cash flows associated with three different projects are as follows: a. Calculate the payback period of

Question:

The cash flows associated with three different projects are as follows:

a. Calculate the payback period of each investment.
b. Which investments does the firm accept if the cutoff payback period is three years? Four years?
c. If the firm invests by choosing projects with the shortest payback period, which project would it invest in?
d. If the firm uses discounted payback with a 15% discount rate and a 4-year cutoff period, which projects will it accept?
e. One of these almost certainly should be rejected, but might be accepted if the firm uses payback analysis. Which one?
f. One of these projects almost certainly should be accepted (unless the firmâ€™s opportunity cost of capital is very high), but might be rejected if the firm uses payback analysis. Which one?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...