Question
Innovative Tech Solutions is considering two new projects with the following net cash flows. The company's required rate of return on investments is 12%. (PV
Innovative Tech Solutions is considering two new projects with the following net cash flows. The company's required rate of return on investments is 12%. (PV of $1, FV of $1, PVA of $1, and FVA of $1).
Year | Project Alpha | Project Beta |
0 | $(250,000) | $(300,000) |
1 | $90,000 | $120,000 |
2 | $130,000 | $150,000 |
3 | $160,000 | $180,000 |
4 | $60,000 | $90,000 |
a. Compute the payback period for each project. Based on the payback period, which project is preferred?
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Financial Accounting
Authors: David Spiceland, Wayne Thomas, Don Herrmann
4th edition
1259307956, 978-1259307959
