Question: Gamma Enterprises is evaluating two potential construction projects. The required rate of return is 12%. Year Project Build Project Construct 0 $(110,000) $(130,000) 1 $30,000
Gamma Enterprises is evaluating two potential construction projects. The required rate of return is 12%.
Year | Project Build | Project Construct |
0 | $(110,000) | $(130,000) |
1 | $30,000 | $35,000 |
2 | $35,000 | $40,000 |
3 | $40,000 | $45,000 |
4 | $45,000 | $50,000 |
a. Calculate the payback period for both projects. Which project is preferred based on the payback period?
b. Determine the net present value for each project. Which project should be selected based on the net present value?Step by Step Solution
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