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Net Cash Inflows Project L Project M Project N Accumulated Annual Accumulated $ 100,000 $ 200,000 $ 200,000 Year Annual Annual Accumulated $ 100,000 $ 400,000 $ 400,000 100,000 200,000 250,000 450,000 400,000 800,000 100,000 300,000 350,000 800,000 100,000 400,000 400,000 1,200,000 100,000 500,000 500,000 1,700,000 100,000 600,000 100,000 700,000 100,000 800,000 2. 3. 4) 00

Net Cash Inflows Project L Project M Project N Accumulated Annual Accumulated $ 100,000 $ 200,000 $ 200,000 Year Annual Annual Accumulated $ 100,000 $ 400,000 $ 400,000 100,000 200,000 250,000 450,000 400,000 800,000 100,000 300,000 350,000 800,000 100,000 400,000 400,000 1,200,000 100,000 500,000 500,000 1,700,000 100,000 600,000 100,000 700,000 100,000 800,000 2. 3. 4) 00

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Using payback to make capital investment decisions

Consider the following three projects. All three have an initial investment of $800,000

 

Requirements

  1. Determine the payback period for each project. Rank the projects from most desirable to least desirable based on payback.
  2. Are there other factors that should be considered in addition to the payback period?
Net Cash Inflows Project L Project M Project N Accumulated Annual Accumulated $ 100,000 $ 200,000 $ 200,000 Year Annual Annual Accumulated $ 100,000 $ 400,000 $ 400,000 100,000 200,000 250,000 450,000 400,000 800,000 100,000 300,000 350,000 800,000 100,000 400,000 400,000 1,200,000 100,000 500,000 500,000 1,700,000 100,000 600,000 100,000 700,000 100,000 800,000 2. 3. 4) 00
Transcribed Image Text:Net Cash Inflows Project L Project M Project N Accumulated Annual Accumulated $ 100,000 $ 200,000 $ 200,000 Year Annual Annual Accumulated $ 100,000 $ 400,000 $ 400,000 100,000 200,000 250,000 450,000 400,000 800,000 100,000 300,000 350,000 800,000 100,000 400,000 400,000 1,200,000 100,000 500,000 500,000 1,700,000 100,000 600,000 100,000 700,000 100,000 800,000 2. 3. 4) 00
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