Question
The initial fixed capital investment is 1.000.000 ECU each, and one of the projects A and B is selected. The useful life of project A
The initial fixed capital investment is 1.000.000 ECU each, and one of the projects A and B is selected. The useful life of project A is 5 years and project B is 8 years. Annual net cash flows are shown below. Make the project selection using this data and based on the payback period. If the income they will bring during their useful life in both projects is taken into account, is there a preference change?
net cash flows values, ECU/year for projects A and B
| Year | Project A | Project B |
| 0 | - 1.000.000 | -1.000.000 |
| 1 | 500 000 | 0 |
| 2 | 300 000 | 100 000 |
| 3 | 200 000 | 200 000 |
| 4 | 100 00 | 300000 |
| 5 | 50000 | 400000 |
| 6 | 0 | 500000 |
| 7 | 0 | 600000 |
| 8 | 0 | 700000 |
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Financing The Sport Enterprise
Authors: Thomas H. Sawyer, Michael Hypes, Julia Ann Hypes, Tonya L. Sawyer
2nd Edition
041579000X, 9781571677853
