An IT company receives two new project proposals. Project A will cost $250,000 to develop and is expected to have an annual net cash flow of $50,000. Project B will cost $350,000 to develop and is expected to have an annual net cash flow of $60,000. Analyzing the two projects from a cashflow perspective using the payback period, which project is better?  Why?  Write the answers in the “Payback" tab of the attached EXCEL template. You may use the Payback Period template if you wish to.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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  1. An IT company receives two new project proposals. Project A will cost $250,000 to develop and is expected to have an annual net cash flow of $50,000. Project B will cost $350,000 to develop and is expected to have an annual net cash flow of $60,000. Analyzing the two projects from a cashflow perspective using the payback period, which project is better?  Why?  Write the answers in the “Payback" tab of the attached EXCEL template. You may use the Payback Period template if you wish to.

Note: Enter your criteria, weights, and scores in the template below

Insert or clear rows and columns as needed. Double check formulas and results.

Criteria   Project 1 Project 2 Project 3 Project 4 Project 5
Sponsor Support            
Strategic Alliance            
Urgency            
Fills a market gap            
Sales            
Competition            
             
Weighted Project Scores 0.00 0 0 0 0 0

 

 

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