Flasher Freight Ltd is considering three investments for the new year. The company has a cost of

Question:

Flasher Freight Ltd is considering three investments for the new year. The company has a cost of capital of 12%. Summary information concerning the net cash inflows of the investments and their initial costs is shown below:

Year	Investment
Year	A		B		C
1 2 3 4 5 6 7 8 9 10 11 12 Initial cost		$48000 48000 48000 48000 48000 48000 48000 48000 $(198493)		$ 36000 36000 36000 36000 36000 $(120875)		$24000 24000 24000 24000 24000 24000 24000 24000 24000 24000 24000 24000 $(124730)

Required

A. Calculate the payback period for each investment.

B. What is the net present value for each investment?

C. What is the net present value index for each investment?

D. Should any of these investments be accepted? If so, in what order should they be accepted, given limited available funds?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... 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... 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,...

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