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a. Determine the payback period of each project. b. Which project is acceptable based on payback period?

a. Determine the payback period of each project. b. Which project is acceptable based on payback period?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $180,000. John Shell, president of the company, has set a maximum payback period of 4 years. The cash inflows associated with each project are shown in the following table: a. Determine the payback period of each project. b. Which project is acceptable based on payback period? C a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. Which project is acceptable based on payback period? (Select the best answer below.) O Project B would be preferred over project A because the larger cash flows are in the early years of the project. O Project A would be preferred over project B because the larger cash flows are in the later years of the project.
Transcribed Image Text:Choosing between two projects with acceptable payback periods Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $180,000. John Shell, president of the company, has set a maximum payback period of 4 years. The cash inflows associated with each project are shown in the following table: a. Determine the payback period of each project. b. Which project is acceptable based on payback period? C a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. Which project is acceptable based on payback period? (Select the best answer below.) O Project B would be preferred over project A because the larger cash flows are in the early years of the project. O Project A would be preferred over project B because the larger cash flows are in the later years of the project.
T d 56 15756SIA Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Cash inflows (CF) Year 1 2 3 4 5 Print Project A $30.000 $40,000 $50,000 $60.000 $40,000 Project B $60.000 $50,000 $40.000 $30,000 $40.000 Done I
Transcribed Image Text:T d 56 15756SIA Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Cash inflows (CF) Year 1 2 3 4 5 Print Project A $30.000 $40,000 $50,000 $60.000 $40,000 Project B $60.000 $50,000 $40.000 $30,000 $40.000 Done I
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