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Calculate the payback period for project

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Reference no: EM133119579

Consider the following independent projects:

 

Cash Flow ($)

Project 

C0

C1

C2 

C3

C4

C5

A

-1,000

1,000

0

0

0

0

B

-2,000

1,000

1,000

1,000

0

0

C

-3,000

1,000

1,000

0

1,000

1,000

a. If the opportunity cost of capital is 8%, calculate the net present value (NPV) of each project.  

b. Based on the NPV calculated in a), which project (s) should a firm accept? Why?

c. Calculate the payback period for each project.

d. Which project(s) would a firm using only the payback rule accept if the cutoff period is three years? 

Reference no: EM133119579

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