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Maximum acceptable payback period

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  1. Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield thefollowing after-tax cash flows.

Year

C

D

1

$4,000

$8000

2

$6,000

$6,000

3

$5,000

$6,000

4

$4,000

$1,000

5

$6,000

$3,000

6

$2,000

$4,000

7

$2,000

 

8

$2,000

 
  1. Based on the payback technique,  if the maximum acceptable  Payback  Period is  4  years , would you accept Project C, ProjectD, neither or  both
  2. Based on the NPV technique, if the required rate of return is 12%,would you accept Project C, Project D, neither or both? (7 marks)
  3. Based on the EAA technique,if the required rate of return is 12%, would you accept Project C, Project D, neither or both? (7 marks)

Reference no: EM133057363

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