Question
DEF Corporation is reviewing two exclusive projects, Project M and Project N. Each requires an initial investment of CAD 60,000. The projects' after-tax cash flows
DEF Corporation is reviewing two exclusive projects, Project M and Project N. Each requires an initial investment of CAD 60,000. The projects' after-tax cash flows are as follows:
Year | Cash flows (Project M) | Cash flows (Project N) |
(Initial Investment) | (60,000) | (60,000) |
1 | 20,000 | 10,000 |
2 | 20,000 | 15,000 |
3 | 15,000 | 20,000 |
4 | 10,000 | 25,000 |
a. Determine the payback period for both projects.
b. Based on the payback period, which project should DEF Corporation choose? Explain why.
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
13th Edition
9780132738729, 136119468, 132738724, 978-0136119463
