Question
Book Exercise Capital Budgeting The Iggy Company is considering three capital expenditure projects. Relevant data on each project are as follows: Project A Investment -275,000
Book Exercise Capital Budgeting
The Iggy Company is considering three capital expenditure projects. Relevant data on each project are as follows:
| Project A Investment | -275,000 |
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| Year 1 | $40,000 |
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| Year 2 | 56,000 |
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| Year 3 | 80,295 |
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| Year 4 | 90,400 |
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| Year 5 | 55,000 |
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| Year 6 | 50,000 |
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| Year 7 | 45,000 |
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| Year 8 | 32,000 |
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| Project B Investment | -275,000 |
| Year 1 | $72,000 |
| Year 2 | 50,000 |
| Year 3 | 66,000 |
| Year 4 | 72,000 |
| Year 5 | 29,000 |
| Year 6 | 35,000 |
| Year 7 | 22,000 |
| Year 8 | 36,000 |
| Project C Investment | -275,000 |
| Year 1 | $82,000 |
| Year 2 | 75,000 |
| Year 3 | 65,000 |
| Year 4 | 55,000 |
| Year 5 | 45,000 |
| Year 6 | 35,000 |
| Year 7 | 25,000 |
| Year 8 | 15,000 |
Required:
1. Compute the Payback Period for each project.
2. Select the best investment based on the payback period.
Answer
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Managerial Accounting An Introduction To Concepts Methods And Uses
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil, Sidney Davidson
7th Edition
0030259630, 978-0030259630
