Neil Corporation has three projects under consideration. The cash flows for each of them are shown in
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Question:
Neil Corporation has three projects under consideration. The cash flows for each of them are shown in the following table:
| Project A | Project B | Project C | |
| Initial investment | $40,000 | $40,000 | $40,000 |
| Year(t) | Cash inflows | Cash inflows | Cash inflows |
| 1 | $16,000 | $4,000 | $28,000 |
| 2 | $16,000 | $10,000 | $22,000 |
| 3 | $16,000 | $16,000 | $16,000 |
| 4 | $16,000 | $22,000 | $10,000 |
| 5 | $16,000 | $28,000 | $4,000 |
The firm has a cost of capital of 15?%.
a. Calculate each project\'s payback period. Which project is preferred according to this method?
b. Calculate each project\'s net present value (NPV). Which project is preferred according to this method?
c. Comment on your findings in parts a and b, and recommend the best project. Explain your recommendation.
Expert Answer:
Related Book For 
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
