Question
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
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
$26,000; project Helium requires an initial outlay of $30,000. Using the expected cash inflows given for each project in the following table,
| Expected cash inflows | ||||
| Year | Hydrogen | Helium | ||
| 1 | $5,500 | $6,000 | ||
| 2 | $5,500 | $6,500 | ||
| 3 | $7,000 | $7,500 | ||
| 4 | $4,000 | $4,500 | ||
| 5 | $3,500 | $5,500 | ||
| 6 | $2,000 | $3,500 | ||
Calculate each project's payback period. Which project meets Elysian's standards? The payback period of project Hydrogen is nothing years. (Round to two decimal places.)
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
