Determine the payback period of the two projects

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Reference no: EM133434184

Question: XYZ Inc. is considering buying a machine costing $120,000. There are two options Machine A and Machine B. Machine A will generate net cash inflow of $ 40,000, $ 30,000 & $ 30,000 in year 1, year 2 & year 3 respectively. Machine B will generate net cash inflow of $ 50,000, $ 60,000 & $ 70,000 in year 1, year 2 & year 3 respectively.

Required:

A. Determine the payback period of the two projects and based on the result of your calculation which project should have to be accepted.

B. Determine the discounted payback period of the two projects and based on the result of your calculation which project should have to be accepted. (Assume the market interest rate is 10%)

C. Determine the Net present value of the two projects and based on the result of your calculation which project should have to be accepted. (Assume the market interest rate is 10%)

D. From the given investment proposal evaluation techniques which on is better? Why

Reference no: EM133434184

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