Payback and NPV Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. Calculate each
Payback and NPV Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. Calculate each
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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Question
Payback and
- Calculate each project’s payback period. Which project is preferred according to this method?
Transcribed Image Text:Initial in-
vestment
(CFO)
Year (t)
1
2
3
4
5
Project Project B
A
$40,000
-$40,000
Cash in-
flows (CF)
$13,000 $7,000
13,000 10,000
13,000
13,000
13,000
16,000
13,000
19,000
Project
C
-
$40,000
$19,000
16,000
13,000
10,000
7,000
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