The Iggy Company is considering three capital expenditure projects. Relevant data on each project are as follows: Project A Investment -275,000 Year 1 $40,000 Year 2 56,000 Year 3 80,295 Year 4 90,400 Year 5 55,000 Year 6 50,000 Year 7 45,000 Year 8 32,000 Project B Investment -275,000 Year 1 $72,000 Year 2 50,000 Year 3 66,000 Year 4 72,000 Year 5 29,000 Year 6 35,000 Year 7 22,000 Year 8 36,000 Project C Investment -275,000 Year 1 $82,000 Year 2 75,000 Year 3 65,000 Year 4 55,000 Year 5 45,000 Year 6 35,000 Year 7 25,000 Year 8 15,000 Required: Compute the Payback Period for each project. Select the best investment based on the payback period. Answer
The Iggy Company is considering three capital expenditure projects. Relevant data on each project are as follows:
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Project A Investment |
-275,000 |
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Year 1 |
$40,000 |
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Year 2 |
56,000 |
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Year 3 |
80,295 |
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Year 4 |
90,400 |
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Year 5 |
55,000 |
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Year 6 |
50,000 |
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Year 7 |
45,000 |
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Year 8 |
32,000 |
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Project B Investment |
-275,000 |
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Year 1 |
$72,000 |
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Year 2 |
50,000 |
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Year 3 |
66,000 |
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Year 4 |
72,000 |
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Year 5 |
29,000 |
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Year 6 |
35,000 |
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Year 7 |
22,000 |
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Year 8 |
36,000 |
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Project C Investment |
-275,000 |
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Year 1 |
$82,000 |
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Year 2 |
75,000 |
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Year 3 |
65,000 |
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Year 4 |
55,000 |
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Year 5 |
45,000 |
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Year 6 |
35,000 |
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Year 7 |
25,000 |
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Year 8 |
15,000 |
Required:
- Compute the Payback Period for each project.
- Select the best investment based on the payback period.
Answer
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