Firm is considering two mutually exclusive-required projects

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Reference no: EM131590810

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time: 0 1 2 3 Project A Cash Flow -25,000 15,000 35,000 6,000 Project B Cash Flow -35,000 15,000 15,000 55,000 Use the payback decision rule to evaluate these projects; which one(s) should be accepted or rejected? ? accept neither A nor B ? reject A, accept B ? accept both A and B ? accept A, reject B

Reference no: EM131590810

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