lossom Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,000 -$42,000 1 12,000 30,000 2 12,000 30,000 3 12,000 30,000
lossom Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,000 -$42,000 1 12,000 30,000 2 12,000 30,000 3 12,000 30,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Blossom Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting
| Year | System 1 | System 2 | |||
| 0 | -$12,000 | -$42,000 | |||
| 1 | 12,000 | 30,000 | |||
| 2 | 12,000 | 30,000 | |||
| 3 | 12,000 | 30,000 |
What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.)
Payback period of System 1 is ________yrs & payback period of System 2 is ________yrs.
If the systems are mutually exclusive & the firm always chooses projects with the lowest payback period, in which system should the firm invest?__________
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