Selection of a project on the basis payback and net present

Reference no: EM1311219

Selection of a project on the basis Payback and net present value

Year	Project A	Project B
1	$12,000	$10,000>
2	$8,000>	>$6,000
3	$6,000	$16,000

a) Which of the two projects should be chosen based on the payback method?

b) Which of the two projects should be chosen based on the net present value method? Assume a cost of capital of 10 percent.

c) Should a firm normally have more confidence in answer a or answer b?

Reference no: EM1311219

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