Question: Innovative Solutions Ltd has two projects under consideration with the following cash flows. The company's required rate of return is 7%. PV of $1 (5%)
- Innovative Solutions Ltd has two projects under consideration with the following cash flows. The company's required rate of return is 7%. PV of $1 (5%), PVA of $1 (5%), PV of $1 (7%), and PVA of $1 (7%).
Year | Project I | Project J |
0 | $(400,000) | $(320,000) |
1 | $100,000 | $70,000 |
2 | $110,000 | $80,000 |
3 | $120,000 | $90,000 |
4 | $130,000 | $100,000 |
a. Determine the payback period for each project. Which project has the shorter payback period? b. Determine the net present value for each project. Which project has the higher NPV?
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