You are the operations manager at a large firm looking to make a capital investment in a future project. Your company is considering two project investments. Project A’s payback period is 3 years, and Project B’s payback period is 5.5 years. Your company requires a payback period of no more than 5 years on such projects. a. Which project should they further consider? Why? b. Is there an argument that can be made to advance either project or neither project? Why? c. What other factors might be necessary to make that decision?

You are the operations manager at a large firm looking to make a capital investment in a future project. Your company is considering two project investments. Project A’s payback period is 3 years, and Project B’s payback period is 5.5 years. Your company requires a payback period of no more than 5 years on such projects. a. Which project should they further consider? Why? b. Is there an argument that can be made to advance either project or neither project? Why? c. What other factors might be necessary to make that decision?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter14: Real Options

Section: Chapter Questions

Problem 4MC

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