Question
Cricket T20 is considering three new projects in Australia, New Zealand and South Africa. Each one requires an investment of $25,000 and will last for
Cricket T20 is considering three new projects in Australia, New Zealand and South Africa. Each one requires an investment of $25,000 and will last for three years. Each will produce the following net annual cash flows:
Year | Australia | New Zealand | South Africa | |
1 | $7,000 | $9,600 | $13,000 | |
2 | 9,000 | 9,600 | 9,000 | |
3 | 12,000 | 9,600 | 11,000 | |
Total | $28,000 | $28,800 | $33,000 |
Cricket T20 will not accept any project with a payback period longer than two and a half years.
Calculate each project's cash payback period, ranking the projects by most desirable to least desirable. (12 marks) Show all workings for maximum marks.
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