Question
Bright Future Enterprises is evaluating two capital investment projects. The required rate of return is 9%. Year Project Gold Project Silver 0 $(100,000) $(120,000) 1
Bright Future Enterprises is evaluating two capital investment projects. The required rate of return is 9%.
Year | Project Gold | Project Silver |
0 | $(100,000) | $(120,000) |
1 | $28,000 | $30,000 |
2 | $32,000 | $35,000 |
3 | $36,000 | $40,000 |
4 | $40,000 | $45,000 |
a. Calculate the payback period for both projects. Which project is preferred based on the payback period?
b. Determine the net present value for each project. Which project should be selected based on the net present value?
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Horngrens Accounting
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura
11th edition
978-0133851151, 013385115X, 978-0133866889
