Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Consider the following two mutually exclusive projects:
Cash Flow Cash Flow
Year
0
(A)
-$360,000
(B)
-$56,000
1
47,000
28,000
2
67,000
24,000
3
67,000
21,500
4
442,000
16,600
Whichever project you choose, if any, you require a 15% return on your investment.
a-1. What is the payback period for each project? (Round the final answers to 2 decimal places.)
Project A
Project B
Payback Period
3.40 years
2.19 years
a-2. If you apply the payback criterion, which investment will you choose?
O Project A
Project B
b-1. What is the discounted payback period for each project? (Do not round intermediate calculations. Round the final answers to 2
decimal places.)
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Transcribed Image Text:Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year 0 (A) -$360,000 (B) -$56,000 1 47,000 28,000 2 67,000 24,000 3 67,000 21,500 4 442,000 16,600 Whichever project you choose, if any, you require a 15% return on your investment. a-1. What is the payback period for each project? (Round the final answers to 2 decimal places.) Project A Project B Payback Period 3.40 years 2.19 years a-2. If you apply the payback criterion, which investment will you choose? O Project A Project B b-1. What is the discounted payback period for each project? (Do not round intermediate calculations. Round the final answers to 2 decimal places.)
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