Consider the following three projects. All three have an initial investment of $500,000.E (Click the icon to view the investments.)Requirements1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.2. Are there other factors that should be considered in addition to the payback period?Requirement 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.First, determine the payback period of each project. (Enter the payback period as a numeral )Payback period inProjectyearsProject Lyears6 Data TableProject MyearsProject NyearsNet Cash InflowsProject LProject MProject NYearAnnualAccumulatedAnnualAccumulatedAnnualAccumulatedYear 1 $ 100,000 $100,000 $50,000 $50.000 $ 250,000 $250,000Year 2100,000200,000100, 000150 000250,000500,000Year 3100,000300,000|350,000500,000Year 4100,000400,000450,000950,000Year 5100,000500,000550,0001,500,000Year 6100,000600,000Year 7100,000700,000Year 8100,000800,000

Payback Period is the period in which the amount of Initial Investment can be recovered. Project…

Requirements 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback. Are there other factors that should be considered in addition to the payback period? 2.

Requirements 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback. Are there other factors that should be considered in addition to the payback period? 2.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
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