b) What is the payback period on each of the following projects?Cash Flow in DollarsProjectTime 01A-5,000+1,000+1,000+3,000-1,000-5,000B+1,000+2,000+3,000C+1,000+1,000+3,000+5,00041) Given that you wish to use the payback rule with cut off period of 2 years,which project will you accept?Head2) If you use a cut off period of 3 years, which projects would you accept?3) If the opportunity cost of capital is 10%, which projects have positiveNPVS?4) "Payback gives too much weight to cash flows that occur after the cutoffdate" – Do you agree with this statement. Please explain in short.lictions: OnPsDELL

As per bartleby guidelines, "Since you have posted a question with multiple sub-parts, we will solve…

b) What is the payback period on each of the following projects? Cash Flow in Dollars Project Time 0 1 3 A -5,000 +1,000 +1,000 +1,000 +3,000 B -1,000 +2,000 +3,000 C -5,000 +1,000 +1,000 +3,000 +5,000 4 1) Given that you wish to use the payback rule with cut off period of 2 years, which project will you accept? Hea 2) If you use a cut off period of 3 years, which projects would you accept? 3) If the opportunity cost of capital is 10%, which projects have positive NPVS?

b) What is the payback period on each of the following projects? Cash Flow in Dollars Project Time 0 1 3 A -5,000 +1,000 +1,000 +1,000 +3,000 B -1,000 +2,000 +3,000 C -5,000 +1,000 +1,000 +3,000 +5,000 4 1) Given that you wish to use the payback rule with cut off period of 2 years, which project will you accept? Hea 2) If you use a cut off period of 3 years, which projects would you accept? 3) If the opportunity cost of capital is 10%, which projects have positive NPVS?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

b) What is the payback period on each of the following projects?
Cash Flow in Dollars
Project
Time 0
1
A
-5,000
+1,000
+1,000
+3,000
-1,000
-5,000
B
+1,000
+2,000
+3,000
C
+1,000
+1,000
+3,000
+5,000
4
1) Given that you wish to use the payback rule with cut off period of 2 years,
which project will you accept?
Head
2) If you use a cut off period of 3 years, which projects would you accept?
3) If the opportunity cost of capital is 10%, which projects have positive
NPVS?
4) "Payback gives too much weight to cash flows that occur after the cutoff
date" – Do you agree with this statement. Please explain in short.
lictions: On
Ps
DELL

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Consider a project with the following cash flows in dollars ($): Year Cash Flow0 -15,0001 50002 50003 50004 5000 Assume the appropriate discount rate for this project is 12%. What is the payback period for this project? (Round your answer to the tenths.)
Please solve step by step for clarity, thank you!
a. Calculate the net present value of the following project for discount rates of o, 50, and 100%: Co -6,750 b. What is the IRR of the project? Cash Flows ($) C₁ +4,500 C₂ +18,000
A project has the following cash flows: C * 0 = - 100000; C 1 = 50000 C * 2 = 150000 C 3 = 100000 . If the discount rate changes from 12 percent to 15 percent, what is the CHANGE in the NPV of the project ( approximately)? Multiple Choice 12,750 increase 12,750 decrease 14,240 increase 14,240 decrease
Calculate the payback period, the discounted payback period and the NPV for the following project using a rate of 5%. Time Cash Flow 0 - $53,000 1 $ 21,000 2 $ 21,000 3 $ 21,000 NPV = Payback = Discounted Payback =
Calculate the payback period, the discounted payback period and the NPV for the following project using a rate of 5%. Time Cash Flow 0 - $63,000 $ 21,000 $ 21,000 $ 21,000 $ 21,000 Payback = Discounted Payback =
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3) Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A $4,000,000 $2,003,000 $2,003,000 $2,003,000 $2,003,000 Project B $4,000,000 0 0 0 $11,000,000 Calculate the net present value of each of the above projects, assuming a 14 percent discount rate. What is the internal rate of return for each of the above projects? Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above. If 14 percent is the required rate of return, and these projects are independent, what decision should be made? If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be made?
3. A. B. C. time Capital Budgeting Project S Project L D. 0 -1000 -1000 1 500 100 2 400 200 3 300 300 4 200 400 5 100 500 USE NPV METHOD, assuming the WACC is 10%. Which project will you invest? Use IRR method, which project will you invest? Assuming WACC is 10%, use MIRR, which project will you invest? Use payback period method, which project will you invest?
You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted? Project Cost (millions) NPV(millions) A 3.25 0.80 В 1.75 0.52 C 4.5 0.69 D 3.75 0.95 E 1.25 0.25 F 0.50 0.25

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