A company decided to choose between two projects based on the shorter discounted payback period at an interest rate of i=10%. Both projects will have a service life of 6 years. Project A needs an initial investment of $20,000 and will generate a net cash flow in years 1 through 6 of $6,500.
Project B needs $17,500 to invest initially, and will have a variable net cash flow as follows:
$1,500 in year 1,
$3,000 in year 2,
$4,500 in year 3,
$5,000 in year 4, and $7,000 each in years 5 and 6.
Which project will the company choose and what is its discounted payback period?

Answer rating: 100% (QA)

2210 n6 years Project A Initial Investment 20000 Net Cashflus ... View the full answer