Project A Project B Project C Project D Project E

Today (20,000) (30,000) (7,500) (4,000) (6,000)

Year 1 10,000 6,000 2,000 2,000 750

Year 2 6,000 8,000 3,000 2,500 1,500

Year 3 4,000 10,000 4,000 3,000 2,250

Year 4 2,000 8,000 2,500 3,000

Year 5 1,000 6,000 2,000 3,750

Year 6 500 4,000 (8,000) 4,000

1. What is the payback period of project E?

a) 3 year

b) 3.5 years

c) 4.25 years

d) 5 years

2. What is the crossover rate between projects A and B?

a) 8.4%

b) 11.2%

c) 13.6%

d) There are multiple crossover rates

3. What is the NPV of project D if the cost of capital is 6%?

a) -34 b) 272 c) 466 d) 652

4. If A and C are repeatable, mutually exclusive projects, then which one is better if the WACC is 8%?

a) Project A b) Project C