Which project or projects should the firm accept and why

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Reference no: EM13928183

Valley Products, Inc. is considering two independent investments having the follow- ing cash flow streams:

Year	Project A	Project B
0	-$50,000	-$40,000
1	þ20,000	þ20,000
2	þ20,000	þ10,000
3	þ10,000	þ5,000
4	þ5,000	þ5,000
5	þ5,000	þ40,000

Valley uses a combination of the net present value approach and the payback approach to evaluate investment alternatives. It requires that all projects have a positive net present value when cash flows are discounted at 10 percent and that all projects have a payback no longer than three years. Which project or projects should the firm accept? Why?

Reference no: EM13928183

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