1. Assume that the risk adjusted cost of capital is 16% for project A, 18% for project B, and 20% for project C.

Project A:              Estimated cash flow is $25,800 per year for 10 years.
                              Cost $100,000

Project B:              Estimated cash flow is $33,500 per year for 8 years.
                              Cost $125,000

Project C:              Estimated cash flow is $44,000 per year for 7 years.
                              Cost $155,000

A. Compute the Payback, NPV, IRR and Profitability Index for each.
B. Rank order the Projects according to the value to the firm

Answer rating: 100% (QA)

ANSWER A Lets calculate the Payback Period Net Present Value NPV Internal Rate of Return IRR and Pro... View the full answer