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Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year:

Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year:

Here are the expected cash flows for three projects:


Cash Flows (dollars)
Project Year: 0 1 2 3 4
A − 6,600 + 1,400 + 1,400 + 3,800 0
B − 2,600 0 + 2,600 + 2,800 + 3,800
C − 6,600 + 1,400 + 1,400 + 3,800 + 5,800

a. What is the payback period on each of the projects?

Project Payback period
A years
B years
C years

b. If you use a cutoff period of 2 years, which projects would you accept?


Project A
Project B
Project C
Project A and Project B
Project B and Project C
Project A and Project C
Projects A, B, and C
None

c. If you use a cutoff period of 3 years, which projects would you accept?


Project A
Project B
Project C
Project A and Project B
Project B and Project C
Project A and Project C
Projects A, B, and C
None

d-1.
If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project NPV
A $
B $
C $

d-2. Which projects have positive NPVs?


Project A
Project B
Project C
Project A and Project B
Project B and Project C
Project A and Project C
Projects A, B, and C
None

e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false?


True
False

Rosa Parks 07-Nov-2017

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