Question 2: Comparing Two Projects Using the Payback Method Project A Project B 1 5 5 7 Investment Annual savings $700,000 $225,000 $400,000 $110,000 8 9 0 Payback period 3.1 years 3.6 years Rate of return 32.1% 27.5% 2 33 34 35 Answer 36 37 38 Base on the Payback calculations above, which project would you accept? Why. Assume for project A the investment was $980,000 and annual savings was $210,000 and for Project B Investment was $850,000 and Questions Annual savings was $300,000. Which project would you recommend after the changes? Why? How do the changes in Investments and Annual Savings affect the Rate of Returns for each project? What does the changes in Rate of Return mean to the investor? 39 40 41 12 Sheet1 Ready DI