Question
In: Finance
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 the payback period for each project: (Round your answers to 2 decimal places. If a project never pays back, enter "0".)
Project A year(s)
Project B year(s)
Project C year(s)
c. Which project(s) would a firm using the payback rule accept if the cutoff period were three years?
Project(s) accepted
d. Calculate the discounted payback for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places. If a project never pays back, enter "0".)
Project A year(s)
Project B year(s)
Project C year(s)
e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years?
Project(s) accepted
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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 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 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 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
----
----
+$208.35
Calculate the NPV of each project for a discount rate of
14%.
What is approximately the IRR for each project individually?
Use the IRR cross-over method to determine which of the projects
you should accept (describe the correct decision rule describing
when you pick A versus B based on what discount rate).
U(C1, C2, C3, C4, C5) = C1∙C2∙C3∙C4∙C5 As a mathematical function, does U have a maximum...
U(C1, C2, C3, C4, C5) = C1∙C2∙C3∙C4∙C5
As a mathematical function, does U have a maximum or minimum
value? What values of Ci correspond to the minimum value of U? What
values of Ci correspond to the maximum value of U? Do these values
of Ci make sense from an economic standpoint?
Now let us connect the idea of economic utility to actual dollar
values. To keep the values more manageable, we will use household
income rather than the entire...
U(C1, C2, C3, C4, C5) = C1∙C2∙C3∙C4∙C5 As a mathematical function, does U have a maximum...
U(C1, C2, C3, C4, C5) = C1∙C2∙C3∙C4∙C5
As a mathematical function, does U have a maximum or minimum
value? What values of Ci correspond to the minimum value of U? What
values of Ci correspond to the maximum value of U? Do these values
of Ci make sense from an economic standpoint?
Now let us connect the idea of economic utility to actual dollar
values. To keep the values more manageable, we will use household
income rather than the entire...
Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...
Here are the cash flows for two mutually exclusive projects:
Project
C0
C1
C2
C3
A
−$
23,000
+$
10,120
+$
10,120
+$
10,120
B
−
23,000
0
0
+
31,050
What is the IRR of each project? (Round your answers to
2 decimal places.)
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