Ocean Carriers

Valuing Capital Investment Projects

1. A.

1) Project A:

|Project A |Year 1 |Year 2 |Year 3 |

|Revenue |21000 | |　 |

|Expenses |11000 |　 |　 |

|Before-tax cash flow (1) |10000 | |　 |

|Depreciation |10000 |　 |　 |

|Before-tax income |0 | |　 |

|Tax (2) |0 |　 |　 |

|After-tax cash flow (1)-(2) |10000 |　 |　 |

The payback period is 1 year.

Project B:

|Project B |Year 1 |Year 2 |Year 3 |

|Revenue |15000 |17000 |　 |

|Expenses |5833 |7833 |　 |

|Before-tax cash flow (1) |9167 |9167 |　 |

|Depreciation |5000 |5000 |　 |

|Before-tax income |4167 |4167 |　 |

|Tax (2) |1666.8 |1666.8 |　 |

|After-tax cash flow (1)-(2) |7500.2 |7500.2 |　 |

The payback period is 2 years.

Project C:

|Project C |Year 1 |Year 2 |Year 3 |

|Revenue |10000 |11000 |30000 |

|Expenses |5555 |4889 |15555 |

|Before-tax cash flow (1) |4555 |6111 |14445 |...