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Part (B) First Time Cinema is a small company that produces movies for artists who have little prior experience in the film industry. Because of
Part (B) First Time Cinema is a small company that produces movies for artists who have little prior experience in the film industry. Because of the high risk associated with these projects, the company will not accept projects that have a payback period of more than three years. The company is considering two projects and requests your assistance in evaluating their potential given their projected cash flows. Year 0 1 2. 3 4 5 Project 1 ($25 000 $19 000 $1000 $10 000 $10 000 $10 000 Project 2 ($100 000) ($20 000) $40 000 $40 000 $40 000 $450 000 Required: (a) Calculate the payback period for each project. (b) Which project(s) would you reject? Why? (c) Calculate the accounting rate of return (ARR) for Project 1
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