Davis Corporation is faced with two independent investment opportunities. The corporation has an investment policy which requires acceptable projects to recover all costs within 3 years. The cost of capital is 10 percent. The cash flows for the two projects are:

Project A Project B

Year Cash Flow Cash Flow

0 -$120,000 -$90,000

1 42,000 30,000

2 43,000 30,000

3 44,000 30,000

4 45,000 30,000

5 46,000 30,000

What is the payback period for each investments?

		A = 2.8 years and B = 2.43 years
		A = 2.8 years and B = 3 years
		A = 2.2 years and B = 3.3 years
		A = 3.8 years and B = 3.43 years
		A = 2 years and B = 3 years

1 points

QUESTION 7

What is the discounted payback period for each investments?

		4.43 years and 2.75 years
		3.03 years and 3.75 years
		3.43 years and 4.75 years
		4.43 years and 3.75 years
		3.43 years and 3.75 years

1 points

QUESTION 8

What is the NPV of each investments?

		$42,075 and $23,724
		$26,075 and $43,724
		$42,075 and $23,024
		$46,075 and $23,724
		$46,075 and $26,724