Neil Corporation has two projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital Project AProject BInitial Cash OutflowPhp400,000Php400,000YearCash Inflows 170,000190,0002100,000160,0003130,000130,0004160,000100,0005190,00070,000 1.Compute for the Payback Period of the two projects.2.Compute for the Net Present Value of the two projects.3.Considering the Payback Period and Net Present Value, Which of the two project would you recommend and why?

The payback period refers to the amount of time it takes to recover the cost of an investment. In…

Answered: Neil Corporation has two projects under…

Neil Corporation has two projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 4CMA

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Neil Corporation has two projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital

	Project A	Project B
Initial Cash Outflow	Php400,000	Php400,000
Year	Cash Inflows
1	70,000	190,000
2	100,000	160,000
3	130,000	130,000
4	160,000	100,000
5	190,000	70,000

1.Compute for the Payback Period of the two projects.

2.Compute for the Net Present Value of the two projects.

3.Considering the Payback Period and Net Present Value, Which of the two project would you recommend and why?

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