Calculate the payback period for each project. y. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
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Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table

Cash flows                              Project A           Project B                Project C
Initial investment (CF0)           $60,000            $100,000                $110,000
Cash inflows (CFt), t = 1 to 5   $20,000            $ 31,500                 $ 32,500

x. Calculate the payback period for each project.
y. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%.

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