Question
ABC Corporation is evaluating two different investment projects, Project M and Project N. The cash flows are as follows: Year Project M (USD) Project N
- ABC Corporation is evaluating two different investment projects, Project M and Project N. The cash flows are as follows:
Year | Project M (USD) | Project N (USD) |
0 | (500,000) | (500,000) |
1 | 100,000 | 50,000 |
2 | 150,000 | 100,000 |
3 | 200,000 | 150,000 |
4 | 300,000 | 250,000 |
5 | 350,000 | 300,000 |
Requirements: a. Calculate the payback period for both projects. b. Determine the NPV for both projects assuming a discount rate of 8%. c. Which project should ABC Corporation invest in based on NPV and why?
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Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac
22nd Edition
324401841, 978-0-324-6250, 0-324-62509-X, 978-0324401844
