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Quick Flick is considering two investments. Both require a net investment of $120,000 and have the following net cash flows: Year Project X Project Y 1 $50,000 $25,000 2 40,000 45,000 3 30,000 50,000 4 25,000 60,000 5 20,000 70,000 Quick uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. The firm uses a discount rate of 14 percent and requires that all projects have a payback period no longer than 3 years. Which investment or investments should Quick accept?

Quick Flick is considering two investments. Both require a net investment of $120,000 and have the following net cash flows: Year Project X Project Y 1 $50,000 $25,000 2 40,000 45,000 3 30,000 50,000 4 25,000 60,000 5 20,000 70,000 Quick uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. The firm uses a discount rate of 14 percent and requires that all projects have a payback period no longer than 3 years. Which investment or investments should Quick accept?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 8P
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Quick Flick is considering two investments. Both require a net investment of $120,000 and have the following net cash flows:

Year Project X Project Y
1 $50,000 $25,000
2 40,000 45,000
3 30,000 50,000
4 25,000 60,000
5 20,000 70,000

Quick uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. The firm uses a discount rate of 14 percent and requires that all projects have a payback period no longer than 3 years. Which investment or investments should Quick accept?

 

a.only Project X
b.only Project Y
c.both projects X and Y
d.reject both projects
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