Question Description
1) Anoma Inc. is considering two mutually exclusive projects. Each requires an initial investment of $100,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table:
|
Year |
Cash inflow of Project A |
Cash inflow of Project B |
|
1 |
$ 10,000 |
$ 40,000 |
|
2 |
20,000 |
30,000 |
|
3 |
30,000 |
20,000 |
|
4 |
40,000 |
10,000 |
|
5 |
20,000 |
20,000 |
2) Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital.
|
Project A |
Project B |
Project C |
|
|
Initial Investment |
$40,000 |
$ 40,000 |
$ 40,000 |
|
Year |
Cash inflows ($) |
||
|
1 |
13,000 |
7,000 |
19,000 |
|
2 |
13,000 |
10,000 |
16,000 |
|
3 |
13,000 |
13,000 |
13,000 |
|
4 |
13,000 |
16,000 |
10,000 |
|
5 |
13,000 |
19,000 |
7,000 |
Follow Us