Britney Javelin Company is considering two investments, both of which cost $15,000. The cash flows are as

Question:

Britney Javelin Company is considering two investments, both of which cost $15,000. The cash flows are as follows:

Project M Project N $6,750 Year $8,100 5,400 4,050 10,800 3 4,050

a. Which of the two projects should be chosen based on the payback method?
b. Which of the two projects should be chosen based on the NPV method? Assume a cost of capital of 7 percent.
c. Should a firm normally have more confidence in answer a or answer b.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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