Artful Crossing Services is considering three new projects. Each project will last three years and will require an initial investment of $81,000 and they will not have a salvage value when completed. The following cash flow information is provided:
Artful has a cost of capital of 10% and a tax rate of 21%.
Instructions
a. Calculate the discounted payback period for each investment.
b. Based on the payback period, rank the projects from best to worst.
c. Compute the net present value of each project.
d. Does the ranking prepared in part b change?

Question

Artful Crossing Services is considering three new projects. Each project will last three years and will require an initial investment of $81,000 and they will not have a salvage value when completed. The following cash flow information is provided: 
  Artful has a cost of capital of 10% and a tax rate of 21%.
Instructions
a. Calculate the discounted payback period for each investment.
b. Based on the payback period, rank the projects from best to worst.
c. Compute the net present value of each project.
d. Does the ranking prepared in part b change?

Quizplus · Accepted Answer

The Answer of Artful Crossing Services is considering three new projects. Each project will last three years and will require an initial investment of $81,000 and they will not have a salvage value when completed. The following cash flow information is provided: 
  Artful has a cost of capital of 10% and a tax rate of 21%.
Instructions
a. Calculate the discounted payback period for each investment.
b. Based on the payback period, rank the projects from best to worst.
c. Compute the net present value of each project.
d. Does the ranking prepared in part b change?

Artful Crossing Services Is Considering Three New Projects