A firm is considering the following projects. Its opportunity cost of capital is 9%. Cash Flows, $ 1 2 3 -5,200 +1,050 +1,050 +3,100 Project Time: A B с -1,200 0 +1,200 +2,100 +3,100 -5,200 +1,050 +1,050 +3,100 +5,200
A firm is considering the following projects. Its opportunity cost of capital is 9%. Cash Flows, $ 1 2 3 -5,200 +1,050 +1,050 +3,100 Project Time: A B с -1,200 0 +1,200 +2,100 +3,100 -5,200 +1,050 +1,050 +3,100 +5,200
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![c. If you use a cutoff period of 3 years with the discounted payback rule, which projects
would you accept?
d. Which projects have positive NPVs?
e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or
false?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62c8d550-4211-4a74-86f6-8045562ab9af%2F32b0faa5-ee60-4316-87a1-3b5d2115692b%2Fb60119m_processed.jpeg&w=3840&q=75)
Transcribed Image Text:c. If you use a cutoff period of 3 years with the discounted payback rule, which projects
would you accept?
d. Which projects have positive NPVs?
e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or
false?
![A firm is considering the following projects. Its opportunity cost of capital is 9%.
Cash Flows, $
2
3
+1,050 +3,100
0
0 +1,200 +2,100 +3,100
-5,200 +1,050 +1,050 +3,100 +5,200
Project Time:
A
a-1. What is the payback period on each project? (Do not round intermediate
calculations. Round your answers to the nearest whole number.)
Project A
Project B
Project C
1
-5,200 +1,050
-1,200
Project A
Project B
Project C
Payback Period
years
years
years
a-2. What is the discounted payback period on each project? (Do not round
intermediate calculations. Round your answers to 2 decimal places. If any of the
projects does not pay back on a discounted basis, enter zero ("0").)
Discounted Payback Period
years
years
years
b. Given that you wish to use the payback rule with a cutoff period of 2 years, which
projects would you accept?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62c8d550-4211-4a74-86f6-8045562ab9af%2F32b0faa5-ee60-4316-87a1-3b5d2115692b%2Fnus5fq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A firm is considering the following projects. Its opportunity cost of capital is 9%.
Cash Flows, $
2
3
+1,050 +3,100
0
0 +1,200 +2,100 +3,100
-5,200 +1,050 +1,050 +3,100 +5,200
Project Time:
A
a-1. What is the payback period on each project? (Do not round intermediate
calculations. Round your answers to the nearest whole number.)
Project A
Project B
Project C
1
-5,200 +1,050
-1,200
Project A
Project B
Project C
Payback Period
years
years
years
a-2. What is the discounted payback period on each project? (Do not round
intermediate calculations. Round your answers to 2 decimal places. If any of the
projects does not pay back on a discounted basis, enter zero ("0").)
Discounted Payback Period
years
years
years
b. Given that you wish to use the payback rule with a cutoff period of 2 years, which
projects would you accept?
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