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E10-1 Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an
E10-1 Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an initial outlay of $25,000; project Helium requires an initial outlay of $35,000. Using the expected cash inflows given for each project in the following table, calculate each project's payback period. Which project meets Elysian's standards?
Expected Cash Inflows | ||
Year | Hydrogen | Helium |
1 | $6,000 | 7,000 |
2 | 6,000 | 7,000 |
3 | 8,000 | 8,000 |
4 | 4,000 | 5,000 |
5 | 3,500 | 5,000 |
6 | 2,000 | 4,000 |
Can you please show the work?
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