Neil Corporation has three projects under consideration. The cash flows for each of them are shown in the following table attached: a. Calculate each project's payback period. Which project is preferred? b. Calculate each project's net present value (NPV) assuming a(n) 14% cost of capital. Which project is preferred according to this method? c. Comment on your findings in parts a and b, and recommend the best project.
Neil Corporation has three projects under consideration. The cash flows for each of them are shown in the following table attached: a. Calculate each project's payback period. Which project is preferred? b. Calculate each project's net present value (NPV) assuming a(n) 14% cost of capital. Which project is preferred according to this method? c. Comment on your findings in parts a and b, and recommend the best project.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Neil Corporation has three projects under consideration. The cash flows for each of them are shown in the following table attached:
a. Calculate each project's payback period. Which project is preferred?
b. Calculate each project's net present value (NPV) assuming a(n) 14%
cost of capital. Which project is preferred according to this method?
cost of capital. Which project is preferred according to this method?
c. Comment on your findings in parts a and b, and recommend the best project.
Transcribed Image Text:(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Project A
Project B
Project C
Initial investment (CF)
$40,000
$40,000
$40,000
Year (t)
Cash inflows (CF,)
1
$16,000
$4,000
$28,000
2
$16,000
$10,000
$22,000
3
$16,000
$16,000
$16,000
4
$16,000
$22,000
$10,000
$16,000
$28,000
$4,000
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