Question
SmartTech Solutions is analyzing two new projects with the following net cash flows. The company's required rate of return on investments is 14%. (PV of
SmartTech Solutions is analyzing two new projects with the following net cash flows. The company's required rate of return on investments is 14%. (PV of $1, FV of $1, PVA of $1, and FVA of $1).
Year | Project SmartA | Project SmartB |
0 | $(500,000) | $(550,000) |
1 | $140,000 | $130,000 |
2 | $180,000 | $170,000 |
3 | $220,000 | $210,000 |
4 | $260,000 | $250,000 |
a. Calculate the payback period for each project. Which project is preferred based on the payback period?
b. Calculate the net present value for each project. Which project is preferred based on the net present value?
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Fundamental Accounting Principles
Authors: John J Wild, Ken Shaw
25th Edition
1260247988, 978-1260247985
