1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
icon
Related questions
icon
Concept explainers
Topic Video
Question
1. Google, Inc., uses a maximum payback period of 6 years and
currently must choose between two mutually exclusively projects.
Project Alpha requires an initial outlay of BD 24000; project Beta
requires an initial outlay of BD44000. Using the expected cash
inflows given for each project in the following table.
Expected cash flow
Year Project Alpha Project Beta
1 BD6000
BD19000
2
BD9000
BD6000
3
BD4000
BD4000
4
BD6000
BD13000
5 BD3500
BD5000
6
BD2000
BD4000
Required:
1. Determine the payback period of each project
2. Because they are mutually exclusive, Google must choose one.
Which should the company invest in?
3. Explain why one of the projects is the better choice than the
other
Transcribed Image Text:1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000 2 BD9000 BD6000 3 BD4000 BD4000 4 BD6000 BD13000 5 BD3500 BD5000 6 BD2000 BD4000 Required: 1. Determine the payback period of each project 2. Because they are mutually exclusive, Google must choose one. Which should the company invest in? 3. Explain why one of the projects is the better choice than the other
Expert Solution
steps

Step by step

Solved in 4 steps with 5 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Financial And Managerial Accounting
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage