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Diaz Camera Company is considering two investments, both of which cost $10,000. The cash flows are as follows: Use Appendix B. Year Project A Project
Diaz Camera Company is considering two investments, both of which cost $10,000. The cash flows are as follows: |
Use Appendix B. |
Year | Project A | Project B | ||||
1 | $ | 6,000 | $ | 5,000 | ||
2 | 4,000 | 3,000 | ||||
3 | 3,000 | 8,000 | ||||
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(a-1) | Calculate the payback period for project A and project B. (Round your answers to 2 decimal places.) |
Payback period | |
Project A | years |
Project B | years |
|
(a-2) | Which of the two projects should be chosen based on the payback method? | ||||
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(b-1) | Calculate the net present value for project A and project B. Assume a cost of capital of 10 percent. (Round "PV Factor" to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.) |
Net present value | |
Project A | $ |
Project B | $ |
|
(b-2) | Which of the two projects should be chosen based on the net present value method? | ||||
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(c) | Should a firm normally have more confidence in answer derived based on Net present value method or Payback method?' | ||||
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