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##### Finance Two Problems

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Question;1. Radiology Associates is considering an investment which will cost \$259,000. The investment produces no cash flows for the first year. In the second year, the cash inflow is \$58,000. This inflow will increase to \$150,000 and then \$200,000 for the following two years before ceasing permanently. The firm requires a 14 percent rate of return and has a required discounted payback period of three years. Accept or reject his project? Why?2. Puppy Inc. has the following mutually exclusive investment opportunities. If the appropriate discount rate was 15% what should you do?Year Project X Project Y0 -500 -8001 100 500 2 475 350 3 50 350A. Calculates each project?s payback period cutoff. Which would you accept if Puppy?s payback period cutoff is 2 years?B. Calculate each project?s discounted payback period cutoff. Which would you accept if Puppy?s payback period cutoff is 2 years?C. What is the NPV for each project?

Paper#48578 | Written in 18-Jul-2015

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