What is the payback period for each of the two options

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Medical Experts Inc. is considering to contract an outside company to supply medical equipment for its clients. Medical Experts' managers want to make a decision of choosing between two suppliers who will be contracted for a period of 4 years.

The following are the details of the two options:
            
Supplier                Initial Investment           Annual Cash Flow             Period in years

Supplier 1                   $150,000                  $50,000                                  4
Supplier 2                    $100,000                 $25,000                                 4

Problem a. What is the Payback period for each of the two options?

Problem b. What is the Net Present Value for each of the two options if the expected rate of return is 10%?

Problem c. Which supplier do you think Medical Experts Inc. should choose?

Reference no: EM132953491

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