Calculate the payback period of each project

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Reference no: EM13210785

Problem

You have the chance to participate in three projects that produce the following cash flows (C1 is the cash flow in one year, C2 in two years, etc.):

Project

C1

C2

C3

C4

C5

A

500

500

500

500

500

B

1000

1000

1500

0

1000

C

1500

0

0

0

1000

a. Considering that the initial investments are: Project A: 1,000

Project B: 2,000

Project C: 1,000

If the cost of capital is 15%, compute the NPV for each project. Calculate the payback period of each project. Compute the IRR of each project. Which project do you pick, and why?

b. Considering that the initial investments are different for each project, as follows: Project A: 500

Project B: 2,500

Project C: 1,000

How does your analysis change? Which project do you pick?

Reference no: EM13210785

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