Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter12: Capital Investment Decisions
Section: Chapter Questions
Problem 21BEA
Related questions
Question
Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an initial outlay of $28,000; project Helium requires an initial outlay of $34,000.
Using the expected
|
|
Expected cash inflows
|
||
Year
|
|
Hydrogen
|
|
Helium
|
1
|
|
$6,500
|
|
$8,000
|
2
|
|
$5,000
|
|
$8,000
|
3
|
|
$8,500
|
|
$7,000
|
4
|
|
$3,000
|
|
$4,500
|
5
|
|
$3,500
|
|
$5,000
|
6
|
|
$2,500
|
|
$4,000
|
calculate each project's payback period.
Which project meets Elysian's standards?
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