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Long-term investment decision, payback method Francesco Giovanni's business partner, Pepino, has proposed that they invest in a coffee shop. This investment costs 90,000 today and
Long-term investment decision, payback method Francesco Giovanni's business partner, Pepino, has proposed that they invest in a coffee shop. This investment costs 90,000 today and promises to pay 22,000, 25,000,25,000,20,000, and 18,000 over the next five years. Alternatively, Pepino suggests they can invest 90,000 in a restaurant, which promises to pay 15,000,15,000,15,000, 35,000, and 40,000 over the next five years. a. How long will it take for Francesco and Pepino to recoup their initial investment in the coffee shop? CHAPTER 10 Capital Budgeting Techniques b. How long will it take them to recoup their initial investment in the restaurant? c. Using the payback period, which project should Francesco and Pepino choose? d. Do you see any problems with their choice
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