Compute for the payback periód öf éåch project hich project will you choose and why? Show solution. idxa

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
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2. Compute for the payback period of each project and explain your answer.
Which project will you choose and why? Show solution.
A company has to decide between three possible projects. Capital cost for Project A is
P300,000; Project B P500,000 and Project C P450,000 respectively. Net Cash inflow of
each project are as follows:
Net cash inflow in pesos
Project A
Project B
Project C
Year 1
75, 000
100, 000
50, 000
Year 2
125, 000
200, 000
75, 000
Year 3
125, 000
300, 000
250, 000
Year 4
100, 000
300, 000
300, 000
Year 5
75, 000
150, 000
200, 000
Payback period - Project A
Payback period - Project B.
Payback period - Project C
Transcribed Image Text:2. Compute for the payback period of each project and explain your answer. Which project will you choose and why? Show solution. A company has to decide between three possible projects. Capital cost for Project A is P300,000; Project B P500,000 and Project C P450,000 respectively. Net Cash inflow of each project are as follows: Net cash inflow in pesos Project A Project B Project C Year 1 75, 000 100, 000 50, 000 Year 2 125, 000 200, 000 75, 000 Year 3 125, 000 300, 000 250, 000 Year 4 100, 000 300, 000 300, 000 Year 5 75, 000 150, 000 200, 000 Payback period - Project A Payback period - Project B. Payback period - Project C
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