21 22 Question 2: Comparing Two Projects Using the Payback Method 23 24 25 Project A Project B 26 27 Investment $7,00,000 $4,00,000 28 Annual savings $2,25,000 $1,10,000 29 30 Payback period 3.1 years 31 32 Rate of return 32.1% 27.5% 33 84 Base on the Payback calculations above, which project would you accept? Why. Assume for project A the 35 investment was $980,000 and annual savings was $210,000 and for Project B Investment was $850,000 and 36 Questions Annual savings was $300,000. Which project would you recommend after the changes? Why? How do the 37 changes in Investments and Annual Savings affect the Rate of Returns for each project? What does the 38 changes in Rate of Return mean to the investor? 39 3.6 years A