Question: QUESTION 4 (25 MARKS) a. The cash flows, payback periods, and NPVs for Projects A through F are given below. Assume that for all of

QUESTION 4 (25 MARKS) a. The cash flows, payback periods, and NPVs for Projects A through F are given below. Assume that for all of the following projects, the required rate of retum is 10 percent. Project's expected cash flow: Year Project Project Project Project Project Project A E F 0 -1000 -1000 -1000 -1000 -1000 -1000 1000 200 500 500 300 400 500 500 200 100 700 B D 400 400 2 200 500 3 -300 400 100 4 400 300 100 0 300 200 5 -500 200 400 0 200 -400 Payback period and Net Present Value for Project A through F are given below: Project A B D E F Payback ? 4.0 2.0 3.0 Period -90.90 86.02 168.29 181.08 281.92 2.0 NPV Required: i. Calculate the Payback period for Project A and B. (4 marks) ii. Calculate the net present value for Project A. (5 marks) iii. Analyze why the payback period provides misleading information about the following: a. Project B versus Project C. (2 marks) b. Project D versus Project E. (2 marks) c. Based on your analysis, which project should be selected? (2 marks)

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