Calculate the payback period for each project

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Reference no: EM132862953

Problem - Assume a $200,000 investment and the following cash flows for two alternative capital projects:

Year

Project A

Project B

1

$60,000

$40,000

2

90,000

70,000

3

50,000

80,000

4

40,000

20,000

Required -

a. Calculate the payback period for each project.

b. Using the payback method, if the projects are mutually exclusive, which project would you select and why?

c. If the year four cash flows were $100,000 for Project A and $500,000 for Project B, would your decision change under the payback method? Why or why not?

Reference no: EM132862953

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