A firm is considering three different projects. The expected cash flows are as follows:YearProject AProject...
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A firm is considering three different projects. The expected cash flows are as follows:
Year | Project A | Project B | Project C |
Initial Outlay | -$20,000 | -$15,000 | -$25,000 |
Year 1 | $5,000 | $3,000 | $8,000 |
Year 2 | $7,000 | $5,000 | $10,000 |
Year 3 | $10,000 | $7,000 | $12,000 |
Required:
- Calculate the discounted payback period for each project assuming a discount rate of 12%.
- Determine the NPV for each project at a 12% discount rate.
- Compute the profitability index for each project.
- Find the IRR for each project.
- If the firm's cutoff period for payback is 2 years, which project(s) would be accepted?
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