Question
19. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of
19. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.
| Time: | 0 | 1 | 2 | 3 |
| Project A Cash Flow | -32,000 | 22,000 | 42,000 | 13,000 |
| Project B Cash Flow | -42,000 | 22,000 | 8,000 | 62,000 |
Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected?
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International Finance
Authors: Keith Pilbeam
3rd Edition
1403948372, 978-1403948373
