Which project should rts accept

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Problem 1: RTS Company is evaluating two mutually exclusive projects on the basis of payback. RTS is risk averse and will not accept any project with a payback period over 3 years. Project A has an initial investment of $400,000 and produces incremental operating annual cash flows of $150,000 per year for 5 years. Project B has an initial investment of $350,000 and produces incremental operating annual cash flows of $110,000 for 6 years. Which project(s) should RTS accept?

Option 1: RTS should reject both projects.

Option 2: RTS should accept both projects.

Option 3: RTS should accept Project A and reject Project B.

Option 4: RTS should accept Project B and reject Project A.

Reference no: EM132939826

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