A company is considering two projects. Project I Project II Initial investment $120,000 $120,000 Cash inflow Year 1 $40,000 $20,000 Cash inflow Year 2 $40,000 $20,000 Cash inflow Year 3 $40,000 $32,000 Cash inflow Year 4 $40,000 $48,000 Cash inflow Year 5 $40,000 $50,000 What is the payback period for Project I? a.5 years b.3.5 years c.2.5 years d.1 year e.3 years
A company is considering two projects. Project I Project II Initial investment $120,000 $120,000 Cash inflow Year 1 $40,000 $20,000 Cash inflow Year 2 $40,000 $20,000 Cash inflow Year 3 $40,000 $32,000 Cash inflow Year 4 $40,000 $48,000 Cash inflow Year 5 $40,000 $50,000 What is the payback period for Project I? a.5 years b.3.5 years c.2.5 years d.1 year e.3 years
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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Question
A company is considering two projects.
What is the payback period for Project I?
Project I | Project II | |
Initial investment | $120,000 | $120,000 |
$40,000 | $20,000 | |
Cash inflow Year 2 | $40,000 | $20,000 |
Cash inflow Year 3 | $40,000 | $32,000 |
Cash inflow Year 4 | $40,000 | $48,000 |
Cash inflow Year 5 | $40,000 | $50,000 |
What is the payback period for Project I?
a.5 years
b.3.5 years
c.2.5 years
d.1 year
e.3 years
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