Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows.
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Question:
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively.
Time: | 0 | 1 | 2 | 3 |
Project A Cash Flow | -29,000 | 19,000 | 39,000 | 10,000 |
Project B Cash Flow | -39,000 | 19,000 | 11,000 | 59,000 |
Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected?
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1292018409
3rd edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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