Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. consider the following information: cash flows

Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –6,000 2,000 2,000 2,700 0 B –1,300 0 1,000 3,000 4,000 C –4,000 1,000 2,600 1,500 1,000 a. What is the payback period on each of the above...

60.1K

Verified Solution

Question

Finance

Consider the following information:

Cash Flows ($)
ProjectC0C1C2C3C4
A–6,0002,0002,0002,7000
B–1,30001,0003,0004,000
C–4,0001,0002,6001,5001,000

a. What is the payback period on each of theabove projects? (Round your answers to 2 decimalplaces.)

ProjectPayback Period
Ayear(s)
Byear(s)
Cyear(s)

b. Given that you wish to use the payback rulewith a cutoff period of two years, which projects would youaccept?

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

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

Project B and Project C
Project A
Project C
Project A, Project B, and Project C
Project A and Project C
Project B
Project A and Project B

d. If the opportunity cost of capital is 10%,which projects have positive NPVs?

Project B
Project B and Project C
Project A and Project C
Project C
Project A, Project B, and Project C
Project A
Project A and Project B

e. “If a firm uses a single cutoff period forall projects, it is likely to accept too many short-livedprojects.” True or false?

True
False

f-1. If the firm uses the discounted-paybackrule, will it accept any negative-NPV projects?

Yes
No

f-2. Will it turn down positive-NPVprojects?

Yes
No

Answer & Explanation Solved by verified expert
3.7 Ratings (681 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

You must evaluate a proposal to buy a new milling machine. The base price is $100,000,...

Finance
1.2K views

Paul Adams owns a health club in downtown Los Angeles. He charges his customers an annual...

Statistics
1.2K views

A random sample of 10191019 adults in a certain large country was asked​ \"Do you pretty much think...

Medical Sciences
1.2K views

1. ADH regulation of fluid volume and osmolarity of body fluids. What other hormones influence fluid...

Chemistry
1.2K views

Complete and balance the following equations. (Use the lowest possible coefficients. Include states-of-matter under SATP conditions in...

Geometry
1.2K views

9 Find the exact area of the sector Radius of the circle r 12 cm...

Geometry
1.2K views

Point P is the centroid of triangle QRS If QP 14 cm what is the...

Accounting
1.2K views

Rowen, Inc. had pre-tax accounting income of 900,000 and a tax rate of 40% in...

Accounting
1.2K views