Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 (a) AA AA $7,000 BB 9,000 CC 12,000 BB Total $28,000 $30,000 $10,000 $13,000 10,000 10,000 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. CC Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) 12,000 $36,000 Which is the most desirable project? 11,000 Which is the least desirable project? years years years The most desirable project based on payback period is The least desirable project based on payback period is
Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows. Year 1 2 3 (a) AA AA $7,000 BB 9,000 CC 12,000 BB Total $28,000 $30,000 $10,000 $13,000 10,000 10,000 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. CC Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) 12,000 $36,000 Which is the most desirable project? 11,000 Which is the least desirable project? years years years The most desirable project based on payback period is The least desirable project based on payback period is
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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