Tri Star, Inc., has the following mutually exclusive projects. a. Suppose the companys payback period cutoff is

Question:

Tri Star, Inc., has the following mutually exclusive projects.

PROJECT A YEAR PROJECT B -$15,300 -$10,700 8,700 5,300 2 7,400 4,300 3,100 4,800 3.

a. Suppose the company€™s payback period cutoff is two years. Which of these two projects should be chosen?
b. Suppose the company uses the NPV rule to rank these two projects. Which project should be chosen if the appropriate discount rate is 15 percent?

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... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...