Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Kara, Incorporated, imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available.
| Year | Cash Flow (A) | Cash Flow (B) |
|---|---|---|
| 0 | −$ 56,000 | −$ 101,000 |
| 1 | 22,500 | 24,500 |
| 2 | 29,600 | 29,500 |
| 3 | 24,500 | 29,500 |
| 4 | 10,500 | 239,000 |
-
What is the payback period for each project?
-
Which, if either, of the projects should the company accept?
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