You are the operations manager at a large firm looking to make a capital investment in a future project. Your company is considering two project investments. Project A’s payback period is 3 years, and Project B’s payback period is 5.5 years. Your company requires a payback period of no more than 5 years on such projects. a. Which project should they further consider? Why? b. Is there an argument that can be made to advance either project or neither project? Why? c. What other factors might be necessary to make that decision?
You are the operations manager at a large firm looking to make a capital investment in a future project. Your company is considering two project investments. Project A’s payback period is 3 years, and Project B’s payback period is 5.5 years. Your company requires a payback period of no more than 5 years on such projects. a. Which project should they further consider? Why? b. Is there an argument that can be made to advance either project or neither project? Why? c. What other factors might be necessary to make that decision?
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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You are the operations manager at a large firm looking to make a capital investment in a future
project. Your company is considering two project investments. Project A’s payback period is 3
years, and Project B’s payback period is 5.5 years.
Your company requires a payback period of no more than 5 years on such projects.
a. Which project should they further consider? Why?
b. Is there an argument that can be made to advance either project or neither project? Why?
c. What other factors might be necessary to make that decision?
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