Question: consider the following three projects. All three have an initial investment of $300,000 Net Cash Inflows Project L Project M Project N Year Annual Accumulated
consider the following three projects. All three have an initial investment of $300,000
| Net Cash Inflows |
| |||||
|
| Project L | Project M | Project N | |||
| Year | Annual | Accumulated | Annual | Accumulated | Annual | Accumulated |
| 1 | $75,000 | $75,000 | $25,000 | $25,000 | $150,000 | $150,000 |
| 2 | 75,000 | 150,000 | 75,000 | 100,000 | 150,000 | 300,000 |
| 3 | 75,000 | 225,000 | 200,000 | 300,000 |
| |
| 4 | 75,000 | 300,000 | 250,000 | 550,000 |
| |
| 5 | 75,000 | 375,000 | 350,000 | 900,000 |
| |
| 6 | 75,000 | 450,000 |
|
| ||
| 7 | 75,000 | 525,000 |
|
| ||
| 8 | 75,000 | 600,000 |
|
|
| |
Required
1.
Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.
2.
Are there other factors that should be considered in addition to the payback? period?
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