Consider the following information: Cash Flows, $ Project C 0 C 1 C 2 C 3 C
Question:
Consider the following information:
| Cash Flows, $ | ||||
Project | C 0 | C 1 | C 2 | C 3 | C 4 |
A | –6,900 | +2,100 | +2,100 | +3,100 | 0 |
B | –2,200 | 0 | +1,000 | +3,900 | +4,900 |
C | –6,500 | +3,500 | +3,500 | +4,900 | +6,900 |
a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.)
Project | Payback Period |
A | year(s) |
B | year(s) |
C | year(s) |
b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?
Project B and Project C
Project A and Project C
Project A and Project B
Project B
Project C
Project A, Project B and Project C
Project A
c. If you use a cutoff period of three years, which projects would you accept?
Project A, Project B and Project C
Project A and Project C
Project A
Project C
Project A and Project B
Project B and Project C
Project B
d. If the opportunity cost of capital is 8%, which projects have positive NPVs?
Project A, Project B and Project C
Project B and Project C
Project C
Project A and Project C
Project A
Project B
Project A and Project B
Cornerstones of Financial and Managerial Accounting
ISBN: 978-0324787351
1st Edition
Authors: Rich Jones, Mowen, Hansen, Heitger