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Ray Inc. is evaluating three mutually exclusive Generating value for shareholders is the primary project evaluating criteria for Ray Inc. However, as a second-order concern,

Ray Inc. is evaluating three mutually exclusive Generating value for shareholders is the primary project evaluating criteria for Ray Inc. However, as a second-order concern, they do look at project liquidity. Their cutoff payback period is 3 years. Given below are various outputs generated by the finance team regarding these three projects.

Project 1 Project 2 Project 3

NPV $3,350,000 $3,350,000 $3,000,000

Payback period 2.51 years 2.83 years 4 years

ANS

Project 1 only.

Project 1 and 2.

Project 2 only.

Project 1 and 3.

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