Question: Expected Cash Flows (in $) Year Project K Project L 0 -40,000 -50,000 1 8,000 10,000 2 10,000 12,000 3 12,000 15,000 4 20,000 22,000
Expected Cash Flows (in $)
Year | Project K | Project L |
0 | -40,000 | -50,000 |
1 | 8,000 | 10,000 |
2 | 10,000 | 12,000 |
3 | 12,000 | 15,000 |
4 | 20,000 | 22,000 |
Requirements:
- Determine the payback period for each project.
- Which project would you choose if the standard payback period is 4 years?
- Calculate the discounted payback period using a 7% discount rate.
- Compute the NPV for each project.
- Decide on the project based on NPV.
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