Question: 1. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have

1. Two new software projects are proposed to a

1. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. a. Using the payback period, which project is better from a cash flow standpoint? Why? b. If the project will take 10 years and the discount rate is 10%, which project must be selected using the NPV method? Why? C. Considering your answers to parts (a) and (b), what disadvantage(s) of payback period method do you observe

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!