Homework 6 Solutions - Fall 2008 10/18/2008 ENG 120 Page 1...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Fall 2008 10/18/2008 ENG 120 Page 1 of 5 HOMEWORK #6 SOLUTIONS 1) a- Finding payback periods: Project A: 1000-1000 = 0; payback period is 1 year Project B: 1000-100-200-300-400 = 0; payback period is 4 years Project C: 1000-400-300-200-100 = 0; payback period is 4 years Project D: 1000-500-500 = 0; payback period is 2 years Project E: 1000-400-400 = 200 200/400 = 0.5 payback period is 2.5 years Project F: 1000-500-500 = 0; Payback period is 2 years b- NPV (A) = -1000 + (1000/1.1) = -$90.9 NPV (B) = 5 4 3 2 1 . 1 500 1 . 1 400 1 . 1 300 1 . 1 200 1 . 1 100 1000 + + + + + = $65.3 NPV (C) = 5 4 3 2 1 . 1 500 1 . 1 100 1 . 1 200 1 . 1 300 1 . 1 400 1000 + + + + + = $140.6 NPV (D) = + 3 1 . 1 1 1 . 500 1000 = $243.4 NPV (E) = + 5 1 . 1 1 1 . 400 1000 = $516.31 NPV (F) = 3 2 1 . 1 1000 1 . 1 500 1 . 1 500 1000 + + + = $7380.9 c- Project A : shorter payback period is not a good option in this case, since the project looses money, as negative NVP indicates Project B vs. Project C : When we do not take into account of the return, the projects becomes to be the same; they have the same cash inflows, but in different years. Subsequently, they have the same payback periods. However, project C has a greater NVP, bringing greater value....
View Full Document

Page1 / 5

Homework 6 Solutions - Fall 2008 10/18/2008 ENG 120 Page 1...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online