Question
In: Finance
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
Solutions
Expert Solution
| Project | C0 | C1 | C2 | C3 | C4 | C5 | |
| A | -9000 | 2000 | 3000 | 4000 | 5000 | 6000 | |
| Cumulative Cash Flows | -9000 | -7000 | -4000 | 0 | 5000 | 11000 | |
| Payback Period | 3 | Period when Cumulative Cash Flow=0 | |||||
| Project | C0 | C1 | C2 | C3 | C4 | C5 | |
| B | -11000 | 2000 | 3000 | 4000 | 5000 | 6000 | |
| Payback | -11000 | -9000 | -6000 | -2000 | 3000 | 9000 | |
| Payback Period | 3.40 | (=3+2000/5000) | |||||
| Project | 0 | 1 | 2 | 3 | 4 | 5 | |
| A | -9000 | 2000 | 3000 | 4000 | 5000 | 6000 | |
| Discounted Cash | -9000 | 1818.182 | 2479.339 | 3005.259 | 3415.067 | 3725.528 | |
| Cumulative Cash Flows | -9000 | -7181.82 | -4702.48 | -1697.22 | 1717.847 | 5443.375 | |
| Payback Period | 3.50 | (=31697.223/1717.847 | |||||
| Project | 0 | 1 | 2 | 3 | 4 | 5 | |
| A | -11000 | 2000 | 3000 | 4000 | 5000 | 6000 | |
| Discounted Cash | -11000 | 1818.182 | 2479.339 | 3005.259 | 3415.067 | 3725.528 | |
| Cumulative Cash Flows | -11000 | -9181.82 | -6702.48 | -3697.22 | -282.153 | 3443.375 | |
| Payback Period | 4.08 | (=4+282.153/3725.528)) | |||||
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jeff jeffy answered 1 year agoRelated Solutions
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