Colours Corporation is considering investing in one of two projects – Blue or Green. The initial cost and net cash inflows from each project are shown below. The opportunity cost for both projects is 10% per cent. Cash Flow Project Blue Project Green Initial Cost 1,000,000 1,080,000 Net Cash Inflows Year 1 200,000 280,000 Year 2 260,000 320,000 Year 3 260,000 320,000 Year 4 240,000 320,000 Year 5 240,000 240,000 Discount factors at 10% per annum Year Factor 1 0.9091 2 0.8264 3 0.7513 4 0.6830 5 0.6209 Required: Calculate the payback period for each project.
Colours Corporation is considering investing in one of two projects – Blue or Green. The initial cost and net cash inflows from each project are shown below. The opportunity cost for both projects is 10% per cent. Cash Flow Project Blue Project Green Initial Cost 1,000,000 1,080,000 Net Cash Inflows Year 1 200,000 280,000 Year 2 260,000 320,000 Year 3 260,000 320,000 Year 4 240,000 320,000 Year 5 240,000 240,000 Discount factors at 10% per annum Year Factor 1 0.9091 2 0.8264 3 0.7513 4 0.6830 5 0.6209 Required: Calculate the payback period for each project.
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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Question
Colours Corporation is considering investing in one of two projects – Blue or Green. The initial cost and net
|
Cash Flow |
Project Blue |
Project Green |
|
Initial Cost |
1,000,000 |
1,080,000 |
|
Net Cash Inflows |
||
|
Year 1 |
200,000 |
280,000 |
|
Year 2 |
260,000 |
320,000 |
|
Year 3 |
260,000 |
320,000 |
|
Year 4 |
240,000 |
320,000 |
|
Year 5 |
240,000 |
240,000 |
Discount factors at 10% per annum
|
Year |
Factor |
|
1 |
0.9091 |
|
2 |
0.8264 |
|
3 |
0.7513 |
|
4 |
0.6830 |
|
5 |
0.6209 |
Required:
Calculate the payback period for each project.
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