Question: Consider the projects below and answer the questions. Year 0 Year 1 Year 2 Year 3 Year 4 Project D ($275,000) $105,000 $123,000 $195,000

Consider the projects below and answer the questions. Year 0 Year 1

 Year 2 Year 3 Year 4 Project D ($275,000) $105,000 $123,000 $195,000  $135,000 Project B ($1,750,000) $525,000 $525,000 $525,000 $525,000 Project E ($85,000,000) $25,000,000

Consider the projects below and answer the questions. Year 0 Year 1 Year 2 Year 3 Year 4 Project D ($275,000) $105,000 $123,000 $195,000 $135,000 Project B ($1,750,000) $525,000 $525,000 $525,000 $525,000 Project E ($85,000,000) $25,000,000 $38,000,000 $57,000,000 $25,000,000 A. Calculate the payback period for each of these B. Calculate the average rate of returns. Assuming a savings interest rate of 5.25%, comment on your findings. C. Given all the information at your disposal, which is the most attractive project? If Project Y costs $3,000,000, and it has cash flows of $450,000 per year for 10 years. What is the Pay Back Period (in months and in years) and the Accounting Rate of Return? Payback period in months? Payback period in years? ARR? If the bank interest rate is 5%, is this project worth pursuing? Why? 3. If Project Z costs $67,000, and it has cash flows as per the table below, what is the Pay Back Period and the Accounting Rate of Return? Year 1 Year 2 Year 3 Year 4 $ 13,000 $ 22,000 $ 34,000 $ 28,000 A. What is the payback period in years and months? B. What is the ARR? C. If the bank interest rate is 5%, is this project worth pursuing? Why?

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SOLUTION A Payback period Project D 208 years rounded to 2 years and 1 month Project B 333 years rounded to 3 years and 4 months Project E This projec... View full answer

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