Question
In: Finance
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –6,000 2,000...
Consider the following information:
| Cash Flows ($) | |||||
| Project | C0 | C1 | C2 | C3 | C4 |
| A | –6,000 | 2,000 | 2,000 | 2,700 | 0 |
| B | –1,300 | 0 | 1,000 | 3,000 | 4,000 |
| C | –4,000 | 1,000 | 2,600 | 1,500 | 1,000 |
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 C | |
| Project A and Project C | |
| Project A, Project B, and Project C | |
| Project A | |
| Project A and Project B | |
| Project B and Project C | |
| None | |
| Project B |
c. If you use a cutoff period of three years, which projects would you accept?
| Project B and Project C | |
| Project A | |
| Project C | |
| Project A, Project B, and Project C | |
| Project A and Project C | |
| Project B | |
| Project A and Project B |
d. If the opportunity cost of capital is 10%, which projects have positive NPVs?
| Project B | |
| Project B and Project C | |
| Project A and Project C | |
| Project C | |
| Project A, Project B, and Project C | |
| Project A | |
| Project A and Project B |
e. “If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” True or false?
| True | |
| False |
f-1. If the firm uses the discounted-payback rule, will it accept any negative-NPV projects?
| Yes | |
| No |
f-2. Will it turn down positive-NPV projects?
| Yes | |
| No |
Solutions
jeff jeffy answered 6 months agoRelated Solutions
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,000...
Consider the following projects:
Cash Flows ($) Project C0 C1 C2 C3 C4 C5
A −2,000 2,000 0 0 0 0
B −4,000 2,000 2,000 5,000 2,000 2,000
C −5,000 2,000 1,300 0 2,000 2,000
a. If the opportunity cost of capital is 12%, which project(s)
have a positive NPV?
Positive NPV project(s)
Project A
Project B
Project C
Projects A and B
Projects A and C
Projects B and C
Projects A, B, and C
No project
b. Calculate...
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –6,300 2,300...
Consider the following information:
Cash Flows ($) Project C0 C1 C2 C3 C4
A –6,300 2,300 2,300 2,000 0
B –1,600 0 1,000 3,300 4,300
C –3,700 2,300 1,000 1,800 1,300
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...
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –6,200 2,200...
Consider the following information:
Cash Flows ($)
Project
C0
C1
C2
C3
C4
A
–6,200
2,200
2,200
2,900
0
B
–1,500
0
1,000
3,200
4,200
C
–3,800
2,200
1,300
1,700
1,200
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...
Consider the following cash flows: C0 / C1/ C2 /C3 /C4 ? $ 27 / +...
Consider the following cash flows:
C0 / C1/ C2 /C3 /C4
? $ 27 / + $ 24 / + $ 24 / + $ 24 / ? $ 46
a. Which two of the following rates are the IRRs of this
project? (You may select more than one answer. Single click the box
with the question mark to produce a check mark for a correct answer
and double click the box with the question mark to empty the box...
Cash flows of Project A and B are as following: Project C0 C1 C2 C3 C4...
Cash flows of Project A and B are as following:
Project
C0
C1
C2
C3
C4
C5
A
-9000
2000
3000
4000
5000
6000
B
-11000
2000
3000
4000
5000
6000
Compute the
payback periods for the following two projects.
Payback period
for A = _________ years; for B __________years
If the discount
rate is 10%, what is the discounted payback period?
Discounted
payback period for A=_________ years; for B __________years
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,500...
Consider the following projects:
Cash Flows ($)
Project
C0
C1
C2
C3
C4
C5
A
−2,500
2,500
0
0
0
0
B
−5,000
2,500
2,500
5,500
2,500
2,500
C
−6,250
2,500
2,500
0
2,500
2,500
a. If the opportunity cost of capital is 9%,
which project(s) have a positive NPV?
Positive NPV project(s)
Project A
Project B
Project C
Projects A and B
Projects A and C
Projects B and C
Projects A, B, and C
No project
b. Calculate...
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,800...
Consider the following
projects:
Cash Flows ($)
Project
C0
C1
C2
C3
C4
C5
A
−2,800
2,800
0
0
0
0
B
−5,600
2,800
2,800
5,800
2,800
2,800
C
−7,000
2,800
2,500
0
2,800
2,800
If the opportunity
cost of capital is 12%, which project(s) have a positive NPV?
Positive NPV Projects
Calculate the payback
period for each project.
Project A
years
Project B
years
Project C
years
Which project(s) would
a firm using the payback rule accept...
Consider the following two mutually exclusive projects: Cash Flows ($) Project C0 C1 C2 C3 A...
Consider the following two mutually
exclusive projects:
Cash Flows ($)
Project
C0
C1
C2
C3
A
-$100
+$60
+$60
+$60
B
-$100
----
----
+$208.35
Calculate the NPV of each project for a discount rate of
14%.
What is approximately the IRR for each project individually?
Use the IRR cross-over method to determine which of the projects
you should accept (describe the correct decision rule describing
when you pick A versus B based on what discount rate).
A project has the following forecasted cash flows: Cash Flows ($ thousands) C0 C1 C2 C3...
A project has the following forecasted cash flows:
Cash Flows ($ thousands)
C0
C1
C2
C3
−155
+95
+115
+105
The estimated project beta is 1.51. The market return
rm is 15%, and the risk-free rate
rf is 3%.
a. Estimate the opportunity cost of capital and
the project’s PV (using the same rate to discount each cash flow).
(Do not round intermediate calculations. Enter your cost of
capital answer as a percent and enter your PV answer in thousands....
A project has the following forecasted cash flows: Cash Flows ($ thousands) C0 C1 C2 C3...
A project has the following forecasted cash flows:
Cash Flows ($ thousands)
C0
C1
C2
C3
−125
+67
+85
+75
The estimated project beta is 1.55. The market return
rm is 17%, and the risk-free rate
rf is 7%.
a. Estimate the opportunity cost of capital and
the project’s PV (using the same rate to discount each cash flow).
(Do not round intermediate calculations. Enter your cost of
capital answer as a percent and enter your PV answer in thousands....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain the capabilities of the Ollgdbg and its interfaces. What is rebasing?
- Woodbridge Manufacturing case in Appendix E, and use the three primary project evaluation methods (NPV, IRR...
- I need some good/new/not common research topics for my proposal assignment (Don't Need Political Topics, Technology...
- Write a C++ program that reads integers from standard input until end of file. Print out...
- Woo Audio is a small company in New York that makes high-quality headphone amplifiers. The company...
- How are users categorized? In Linux, which user has all the privileges? Why do we need...
- Force Table: If the center ring were to have considerable mass, what effect would it have...
ADVERTISEMENT