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Exercise Example - Capital Budgeting Project Analysis - Chapter 5 As director of capital budgeting, you are...

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Finance

Exercise Example - Capital Budgeting Project Analysis - Chapter5

As director of capital budgeting, you are reviewing threepotential investment projects with the following cost and cash flowprojections.  

Cash Flow

Project A

Project B

Project C

Investment Cost

($500,000)

($375,000)

($475,000)

Year One Cash Flow

$200,000

$175,000

$250,000

Year Two Cash Flow

$180,000

$50,000

$200,000

Year Three Cash Flow

$100,000

$50,000

$75,000

Year Four Cash Flow

$80,000

$50,000

$30,000

Year Five Cash Flow

$140,000

$300,000

$30,000

  1. Calculate the Payback Period for each project.
  1. If the discount rate for all three projects is 12.5%, calculatethe Net Present Value for each project.

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