1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000

Essentials Of Investments
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1. Google, Inc., uses a maximum payback period of 6 years and
currently must choose between two mutually exclusively projects.
Project Alpha requires an initial outlay of BD 24000; project Beta
requires an initial outlay of BD44000. Using the expected cash
inflows given for each project in the following table.
Expected cash flow
Year Project Alpha Project Beta
1 BD6000
BD19000
2
BD9000
BD6000
3
BD4000
BD4000
4
BD6000
BD13000
5 BD3500
BD5000
6
BD2000
BD4000
Required:
1. Determine the payback period of each project
2. Because they are mutually exclusive, Google must choose one.
Which should the company invest in?
3. Explain why one of the projects is the better choice than the
other
Transcribed Image Text:1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000 2 BD9000 BD6000 3 BD4000 BD4000 4 BD6000 BD13000 5 BD3500 BD5000 6 BD2000 BD4000 Required: 1. Determine the payback period of each project 2. Because they are mutually exclusive, Google must choose one. Which should the company invest in? 3. Explain why one of the projects is the better choice than the other
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