Here Are The Expected Cash Flows For Three Projects Cash Flows Dollars Year 1 Year 2 1 000 1 000 1 000 0 1 000 1 1 (144.74 KiB) Viewed 39 times
Here are the expected cash flows for three projects: Cash Flows (dollars) Year 1 Year 2 +1,000 +1,000 +1,000 0 +1,000 +1,000 Project A B C Year 0 -5,000 -1,000 -5,000 Year 3 +3,000 +2,000 +3,000 Year 4 0 +3,000 +5,000 a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C. Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. d-2. Which projects have positive NPVs? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? X Answer is not complete. Project A 3 Years Project B Projects A, B, and C a. Payback period b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C. d-2. Which projects have positive NPVs? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? Project B 2 Project B and Project C False Years Project C 3 Years 33 >
Consider the following projects: со -$ 2,100 +$ 2,000 -2,100 +1,440 Project A B a. Calculate the profitability index for A and B assuming a 22% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. X Answer is complete but not entirely correct. Profitability Index Project A B C2 +$ 1,200 +1, 728 1.2506 X 1.0726 X b. According to the profitability index rule, which project(s) should you accept? Project A Project B Both Neither
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