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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
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
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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?
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?
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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