depreciation is 70 000 per year for all three projects 593063

Aug 29, 2021 | Uncategorized

(Payback, ARR, NPV) Greystone Hotel projects the cash flows for three alternative investment projects (in $thousands) as follows:

Project

Year 0

1

2

3

4

5

A

$(350)

$100

$200

$100

$100

$140

B

(350)

40

100

210

260

160

C

(350)

200

150

240

40

0

Depreciation is $70,000 per year for all three projects.

For each project, calculate

  1. Payback period
  2. Accounting rate of return (average)
  3. Net present value (assuming a cost of capital of 9%)
    1. Which (if any) project should be accepted?
    2. Explain why.