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B. Calculate the payback period for a project that requires an investment of $120,000, and has the following returns over a 4 year period: Year
| B. Calculate the payback period for a project that requires an investment of $120,000, and has the following returns over a 4 year period: | |||||
| Year | 1 | 2 | 3 | 4 | |
| Cash Flow | $32,456 | $44,652 | $39,673 | $38,950 | |
| C. Calculate the payback period for the project with the following cash flow projection. What do you expect might happen if the time value of money is applied to this project? | |||||
| Year | 0 | 1 | 2 | 3 | 4 |
| CF | ($235,498) | $64,987 | $54,378 | $49,987 | $43,675 |
| D. Select the preferable project using the payback period method. Under what conditions does the use of the payback period make sense for project selection? | |||||
| 0 | 1 | 2 | 3 | 4 | |
| CF Project 1 | ($98,024) | $43,423 | $35,674 | $23,456 | $18,316 |
| CF Project 2 | ($79,315) | $26,000 | $26,000 | $26,000 | $26,000 |
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