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Apply the Concepts Suppose that a company is considering two different and mutually exclusive projects ( A and B ) , where both have a
Apply the Concepts Suppose that a company is considering two different and mutually exclusive projects A and where both have a fiveyear life and require an investment of $ The cash flow patterns for each project are given below. Project A: Even cash flows of $ per year. Project :$$$$ and $ Required: Calculate the payback period for Project A: Payback period years Now assume that a third project, Project becomes available with the same investment outlay and the following annual cash flows projects A B and C are mutually exclusive: Project C: $$$$$ a Calculate the payback for Project round to one decimal place: years. b Project C has the same payback as Project B but should be preferred over Project B for two reasons. First, Project C provides in the first year, while Project returns only $ The extra & that Project returns in the first year could be put to productive use, such as investing in another project. The payback period thus! the time value of money. Feedback
Apply the Concepts
Suppose that a company is considering two different and mutually exclusive projects A and where both have a fiveyear life and require an investment of $ The cash flow patterns for each project are given below.
Project A: Even cash flows of $ per year.
Project :$$$$ and $
Required:
Calculate the payback period for Project A:
Payback period years
Now assume that a third project, Project becomes available with the same investment outlay and the following annual cash flows projects A B and C are mutually exclusive:
Project C: $$$$$
a Calculate the payback for Project round to one decimal place: years.
b Project C has the same payback as Project B but should be preferred over Project B for two reasons. First, Project C provides
in the first year, while Project returns only $ The extra & that Project returns in the first year could be put to productive use, such as investing in another project. The payback period thus! the time value of money.
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