a) Given the following cashflows for Project Omega, what is the payback period in years assuming the cashflows occur annually? Year Cashflows of Project Omega -90,000 20,000 0 1 2 3 4 5 0 1 b) Project X and Y. The following are the cash flows of two projects: Year Project X Project Y -100,000 -50,000 2 3 4 25,000 5 50,000 40,000 150,000 50,000 20,000 40,000 30,000 30,000 20,000 10,000 30,000 If the discount rate is 18% is the project with the highest profitability index also the one with the highest NPV? Yes No
a) Given the following cashflows for Project Omega, what is the payback period in years assuming the cashflows occur annually? Year Cashflows of Project Omega -90,000 20,000 0 1 2 3 4 5 0 1 b) Project X and Y. The following are the cash flows of two projects: Year Project X Project Y -100,000 -50,000 2 3 4 25,000 5 50,000 40,000 150,000 50,000 20,000 40,000 30,000 30,000 20,000 10,000 30,000 If the discount rate is 18% is the project with the highest profitability index also the one with the highest NPV? Yes No
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
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Transcribed Image Text:c)
he cashflows for an investment in Factory X are listed below. Using the discounted payback method of capital budgeting, what is the payback period for this investment expressed in years, assuming that the cashflows occur
annually and using a discount rate of 20%.
Year Factory X
0
1
2
3
4
5
6
300,000
50,000
50,000
100,000
100,000
200,000
200,000
Transcribed Image Text:Q1
a)
Given the following cashflows for Project Omega, what is the payback period in years assuming the cashflows occur annually?
Year Cashflows of Project Omega
0
1
2
3
4
5
0
1
2
3
b)
Project X and Y. The following are the cash flows of two projects:
Year Project X Project Y
-100,000 -50,000
50,000 20,000
40,000
30,000
30,000
30,000
4
-90,000
20,000
5
25,000
50,000
40,000
150,000
20,000
10,000
If the discount rate is 18% is the project with the highest profitability index also the one with the highest NPV?
Yes
No
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