Davis Corporation is faced with two independent investment opportunities. The corporation has an investment policy which requires

Question:

Davis Corporation is faced with two independent investment opportunities. The corporation has an investment policy which requires acceptable projects to recover all costs within 3 years. The corporation uses the discounted payback method to assess potential projects and utilizes a discount rate of 10 percent. The cash flows for the two projects are:

Project B Project A Cash Flow Cash Flow Year ($100,000) ($80,000) 40,000 50,000 40,000 20,000 40,000 30,000 4 30,000 2.

Which investment project(s) does the company invest in?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...