Regular payback period, Financial Management

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The director of capital budgeting for a firm has recognized two mutually exclusive projects, A and B, with the following expected net cash flows:

 

                                                                                                   Expected Net Cash Flows

                                                                Year                       Project A                                             Project B

                                                                  0                              ($100)                                 ($100)

                                                                  1                                  70                                                     10

                                                                  2                                  50                                                     60

                                                                  3                                  20                                                     80

 

Together of the projects have a cost of capital of 14 percent.

 

(i) What is the regular payback period (in years) for Project B?

(ii) What is Project A's net present value (NPV)?

 

 

 

 

 

 

 

 

 


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