Rank projects using payback period which looks best and why

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Reference no: EM13476483

A firm is considering the following three investment projects. The firm doesn't want to make any investment that takes more than three years to recover their initial investment.

Year A B C

0 $(950) $(9,000) $5,500)

1 650 4,500 1,500

2 250 3,500 1,500

3 160 3,500 2,500

4 60 3,500 2,500

5 480 3,500 2,500

a) Given company's 3 year payback period, which of the projects will qualify for acceptance?

b) Rank projects using their payback period. Which looks best and why?

c) If company uses a 9.8% discount rate to analyze projects. What is company's payback period for each project.

Reference no: EM13476483

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