Having troubles solving these questions, can you please provide formula and details on how to solve these problems.
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?