SOLUTION: Below are the estimated cash flows for two projects: S and L. The WACC is 10%. Time 0 | 1 | 2 | 3 | Project L -100| 10 | 60 | 80 | Project S -100| 70 |

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Question 1157712: Below are the estimated cash flows for two projects: S and L. The WACC is 10%.
Time 0 | 1 | 2 | 3 |
Project L -100| 10 | 60 | 80 |
Project S -100| 70 | 50 | 20 |
1) What is the payback period? Find the paybacks for Projects L and S.
2) What is the rationale for the payback method? According to the payback criterion, which project(s) should be accepted if the firm’s maximum acceptable payback is 2 years, if Projects L and S are independent? If Projects L and S are mutually exclusive?
3) What is the difference between the regular and discounted payback methods? What is Project L’s discounted payback, assuming a 10% cost of capital?
Answer by ikleyn(52788) About Me  (Show Source):
You can put this solution on YOUR website!
.

Hey,

consulting in accounting is not our specialization.

This problem is far from the profile of this forum.


Have a nice day (!)