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Calculate the discounted payback period for each project

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Payback Consider the following projects in the table.

Cash Flows
Project C0 C1 C2 C3 C4 C5
A -1,000 1,000 0 0 0 0
B -2,000 1,000 1,000 4,000 1,000 1,000
C -3,000 1,000 1,000 0 1,000 1,000

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

b. Calculate the payback period for each project (Note: the payback period is the amount of time that it takes for a project to recover its initial cost).

c. Which project(s) would a firm chose using the payback rule accept if the cutoff period were three years?

d. Calculate the discounted payback period for each project.

e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years?

Reference no: EM13863074

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