Solution-What is the payback period for Project B

What is the payback period for Project B

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Reference no: EM133013994

Question - A company is considering investing in a new machinery. There are actually two potential projects, Project A and B. Both have a 5-year life and initial cost of 350,000. Project A is expected to generate 115,000 of cash inflows annually while the latter generates 100,000 on the first year, 115,000 on the second, 130,000 on the third, 145,000 on the fourth, and 150,000 on its fifth year.

Required -

A. What is the payback period for Project A (2 decimal places)?

B. What is the payback period for Project B?

C. Assuming Project A and B are mutually exclusive projects, which of the two should be chosen by the company?

D. Assuming the company requires a 5 years payback period for potential projects and Project A and B are independent projects. Which of the two should be chosen by the company?

Reference no: EM133013994

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What is the payback period for Project B

Reference no: EM133013994

Reference no: EM133013994

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