The cash flows for three projects are shown above. The cost of capital is 9.5%. If an investor decided to take projects with a payback period two years or less, which of these projects would he take?
Investment A:
Year: 0 1 2 3 4 5
Cash flow: -$14,000 $6000 $6000 $6000 $6000 $6000
Investment B:
Year: 0 1 2 3 4 5
Cash flow: -$15,000 $7000 $7000 $7000 $7000 $7000
Investment C:
Year: 0 1 2 3 4 5
Cash flow: -$18,000 $12,000 $2000 $2000 $2000 $2000
A) Investment A
B) Investment B
C) Investment C
D) none of these investments
Answer: D
Business
You might also like to view...
Use Table 14.1 to answer the question. Kalil believes in buying in bulk, regardless of who the supplier is. Which supplier would result in the lowest total cost using this criterion?
A) Supplier A B) Supplier B C) Supplier C D) Supplier D
Business
What minimum volume of sales dollars is required to earn an after-tax net income of $30,000?
A) $465,000 B) $330,000 C) $390,000 D) $165,000
Business