Offshore Drilling Products, Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available.

Year

Cash Flow A

Cash Flow B

0

$

56,000

$

101,000

1

22,500

24,500

2

29,600

29,500

3

24,500

29,500

4

10,500

239,000

Requirement 1:
(a)	What is the payback period for project A?
	multiple choice 1 1.84 years 5.16 years 2.16 years 3.00 years 4.84 years

(b)	What is the payback period for project B?
	multiple choice 2 4.93 years 6.07 years 3.07 years 3.93 years .93 years

Requirement 2:

Should it accept either project?

multiple choice 3

• Accept both projects A and B
• Accept project B and reject project A
• Accept project A and reject project B
• Reject both projects A and B