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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 1,000 0 0 C -3,000 1,...

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 1,000 0 0
C -3,000 1,000 1,000 0 1000 1,000

a) If the opportunity cost of capital is 11 percent, which projects have a positive NPV? b) Calculate the payback period for each project. c) Which project(s) would a firm using the payback rule accept if the cutoff period is three years?

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Solution: Part a Project A Project B Project C PV factor at 11% | Cash flow PV Cash flow PV Cash flow PV Year c-a*b e-a*d g-a

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