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The following information will be used to answer questions 8, 9, and 10. Your company can invest in 1 of the following projects: cash flows
The following information will be used to answer questions 8, 9, and 10.
Your company can invest in 1 of the following projects:
| year | project a | project b | ||||||||||||||||||||
| 0 | -70,000 | -65,000 | ||||||||||||||||||||
| 1 | 30K | 8K | ||||||||||||||||||||
| 2 | 10K | 8K | ||||||||||||||||||||
| 3 | 10K | 8K | ||||||||||||||||||||
| 4 | 18K | 9K | ||||||||||||||||||||
| 5 | 5K | 30K | ||||||||||||||||||||
| 6 | 4K | 40K |
The interest rate is 6%.
8a. What is the payback period for each project?
8b. If you base your decision on which project has the shortest payback, which will you choose?
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