f. What is the regular payback period for these two projects? Project A Time period 0 1 2 3 4 5 6 7 Cash flow (375) (300) (200) (100) 600 $600 $926 ($200) Cumulative cash flow Intermediate calculation for payback Payback using intermediate calculations Project B Time period 0 1 2 3 4 5 6 7 Cash flow -$575 $190 $190 $190 $190 $190 $190 $0 Cumulative cash flow Intermediate calculation for payback Payback using intermediate calculations Ok because cash flows follow normal pattern. Payback using PERCENTRANK h. What is the profitability index for each project if the cost of capital is 12%? PV of future cash flows for A: PI of A: PV of future cash flows for B: PI of B:
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In this case, the cumulative cash flow is 3751 - (S0) = 3471. Show more…
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