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What is the project payback

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a) Garry manufacturing company is considering a three year project that has cost of $75000. The project will generate after tax cash flows of $33100 in year 1, $31500 in year 2 and $31200 in year 3. Assume that the firm's proper rate of discount is 10% and that the firm tax rate is 40%. What is the project payback and outline the limitations in using the payback period method in selecting acceptable projects?

b) SRJ corporations is considering an expansion project. The necessary equipment could be purchased for $15 million and shipping and installation costs are another $500000. The project will also require an initial $2 million investment in net working capital. The company tax rate is 40%. What is the project's initial investment outlay (in millions)?

Reference no: EM132565131

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