Diaz Camera pany is considering two investments, both of which cost $10,000. The cash flows are as follows: Year Project A Project B 1 ............... $6,000 $5,000 2 ............... 4,000 3,000 3 ............... 3,000 8,000 Solution: Show your work! a) Payback Method Diaz Camera Company Payback for A Years Project A $10,000 Project B $10,000 Cost of Capital 10% Payback for B Years Year Project A Project B 1 $6,000 $5,000 2 $4,000 $3,000 3 $3,000 $8,000 b) NPV METHOD Project A Present Project B Present Year Cash Flow PVIF @ 10% Value Year Cash Flow PVIF @ 10% Value 1 1 2 2 3 3 Present Value of Inflows = Present Value of Inflows = Present Value of Outflows = Present Value of Outflows = Net Present Value = Net Present Value = c) Should a firm normally have more confidence in answer a or answer b? Explain.

Diaz Camera pany is considering two investments, both of which cost $10,000. The cash flows are as follows: Year Project A Project B 1 ............... $6,000 $5,000 XXXXXXXXXX,000 3,000 XXXXXXXXXX,000...

Diaz Camera pany is considering two investments, both of which cost $10,000. The cash flows are as follows: Year Project A Project B 1 ............... $6,000 $5,000 2 ............... 4,000 3,000 3 ............... 3,000 8,000	*Solution:*	Show your work!
a) Payback Method
*Diaz Camera Company*	Payback for A	Years
Project A	$10,000
Project B	$10,000
Cost of Capital	10%	Payback for B	Years
Year	Project A	Project B
1	$6,000	$5,000
2	$4,000	$3,000
3	$3,000	$8,000
b) NPV METHOD
Project A	Present	Project B	Present
Year	Cash Flow	PVIF @ 10%	Value	Year	Cash Flow	PVIF @ 10%	Value
1	1
2	2
3	3
Present Value of Inflows =	Present Value of Inflows =
Present Value of Outflows =	Present Value of Outflows =
Net Present Value =	Net Present Value =
c) Should a firm normally have more confidence in answer a or answer b? Explain.

Answered Same DayDec 31, 2021

David answered on Dec 31 2021

126 Votes

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