Question
XYZ Corporation is evaluating two independent projects, Project A and Project B. Each requires an initial investment of USD 50,000. The after-tax cash flows for
XYZ Corporation is evaluating two independent projects, Project A and Project B. Each requires an initial investment of USD 50,000. The after-tax cash flows for each project are provided below:
Year | Cash flows (Project A) | Cash flows (Project B) |
(Initial Investment) | (50,000) | (50,000) |
1 | 15,000 | 25,000 |
2 | 20,000 | 15,000 |
3 | 10,000 | 20,000 |
4 | 5,000 | 10,000 |
a. Calculate the payback period for Project A and Project B.
b. Determine which project the company should invest in and justify your choice using the payback period.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Principles of managerial finance
Authors: Lawrence J Gitman, Chad J Zutter
12th edition
9780321524133, 132479540, 321524136, 978-0132479547
