question archive Task: Senior management asks you to recommend a decision on which project(s) to accept based on the cash flow forecasts provided
Task: Senior management asks you to recommend a decision on which project(s) to accept based on the cash flow forecasts provided
Subject:MathPrice: Bought3
Task:
Senior management asks you to recommend a decision on which project(s) to accept based on the cash flow forecasts provided.
Relevant information:
1. The firm uses a 3-year cutoff when using the payback method.
2. The hurdle rate used to evaluate capital budgeting projects is 15%.
The cash flows for projects A, B and C are provided in attachment below.
1. Assume the projects are independent and answer the following:
--Calculate the payback period for each project.
--Which project(s) would you accept based on the payback criterion?
--Calculate the internal rate of return (IRR) for each project.
--Which projects would you accept based on the IRR criterion?
--Calculate the net present value (NPV) for each project.
--Which projects would you accept based on the NPV criterion?
2. Assume the projects are mutually exclusive and answer the following:
--Which project(s) would you accept based on the payback criterion?
--Which projects would you accept based on the IRR criterion?
--Which projects would you accept based on the NPV criterion?
