A company is evaluating three possible investments. The following information is provided by the company: Project A Project B Project C Investment $238,000 $54,000 $238,000 Residual value 0 30,000 40,000 Net cash inflows: Year 1 70,000 30,000 100,000 Year 2 70,000 21,000 70,000 Year 3 70,000 17,000 80,000 Year 4 70,000 14,000 40,000 Year 5 70,000 0 0 What is the payback period for Project A? (Assume that the company uses the straight−line depreciation method.) (Round your answer to two decimal places.) A. 1.8 years B. 2.4 years C. 5.00 years D. 3.4 years
A company is evaluating three possible investments. The following information is provided by the company: Project A Project B Project C Investment $238,000 $54,000 $238,000 Residual value 0 30,000 40,000 Net cash inflows: Year 1 70,000 30,000 100,000 Year 2 70,000 21,000 70,000 Year 3 70,000 17,000 80,000 Year 4 70,000 14,000 40,000 Year 5 70,000 0 0 What is the payback period for Project A? (Assume that the company uses the straight−line depreciation method.) (Round your answer to two decimal places.) A. 1.8 years B. 2.4 years C. 5.00 years D. 3.4 years
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 19PROB
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Question
A company is evaluating three possible investments. The following information is provided by the company:
|
Project A
|
Project B
|
Project C
|
Investment
|
$238,000
|
$54,000
|
$238,000
|
Residual value
|
0
|
30,000
|
40,000
|
Net
|
|
|
|
Year 1
|
70,000
|
30,000
|
100,000
|
Year 2
|
70,000
|
21,000
|
70,000
|
Year 3
|
70,000
|
17,000
|
80,000
|
Year 4
|
70,000
|
14,000
|
40,000
|
Year 5
|
70,000
|
0
|
0
|
What is the payback period for Project A? (Assume that the company uses the
depreciation method.) (Round your answer to two decimal places.)
straight−line
1.8
years2.4
years5.00 years
3.4
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