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Consider the following projects:   Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,200 2,200 0 0 0 0 B −4,400 2,200 2,200 5,200 2,200 2,200 C −5,500 2,200 2,200 0 2,200 2,200     If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Calculate the payback period for each project. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?

Consider the following projects:   Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,200 2,200 0 0 0 0 B −4,400 2,200 2,200 5,200 2,200 2,200 C −5,500 2,200 2,200 0 2,200 2,200     If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Calculate the payback period for each project. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?

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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Consider the following projects:

 

Cash Flows ($)
Project C0 C1 C2 C3 C4 C5
A −2,200 2,200 0 0 0 0
B −4,400 2,200 2,200 5,200 2,200 2,200
C −5,500 2,200 2,200 0 2,200 2,200
 

 

  1. If the opportunity cost of capital is 10%, which project(s) have a positive NPV?

  2. Calculate the payback period for each project.

  3. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?

  4. Calculate the discounted payback period for each project.

  5. Which project(s) would a firm using the discounted payback rule accept if the cutoff period is three years?
     

 

 

 

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