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.
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.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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Question
- 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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