What is the payback period of each project

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Reference no: EM131067917

Calculate the payback period for the following two distinct cash flow steams that both require the same $100,000 initial outlay;

Years Cash Flows for Project A Cash Flows for Project B

1 $25,000 $64,000

2 $55,000 $22,000

3 $20,000 $14,000

4 $150,000 $20,000

5 0 $250,000

Now answer the following questions. Questions to pose:

1. What is the payback period for each project?

2. Which project should you select using a three-year cutoff period?

3. What is the payback period of each project if the initial investment was $150,000?

4. Assuming you have a four-year payback rule, which project would you accept?

5. Are there any issues with this decision?

Reference no: EM131067917

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