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Answered! Compute payback years for project A Project A has an initial investment of exist700,000 and projected cash inflows…

QUESTION 1 1.5 poi Compute payback years for project A Project A has an initial investment of $700,000 and projected cash inflows of $225,000 for 5 years QUESTION 2 1.5 poi Compute payback years for project B Project B has an initial investment of S400,000 and projected cash inflows of $110,000 for 5 years QUESTION 3 1 poir According to your results (Question1 and Question 2)Identify the best project to be funded. O Project B Project A O None Both A& B

Compute payback years for project A Project A has an initial investment of exist700,000 and projected cash inflows of exist225,000 for 5 years Compute payback years for project B Project B has an initial investment of exist400,000 and projected cash inflows of exist110,000 for 5 years According to your results (Question 1 and Question 2) Identify the best project to be funded. Project B Project A None Both A& B

Expert Answer

 Answers:

Question 1:

Answer: 3.1 years

Payback Period:

Payback period for a project =Initial fixed investment divided by Estimated annual net cash inflows.

Hence, for project A,

Initial fixed investment =$700,000

annual net cash inflows = $225,000

Payback period =$700,000/$225,000 =3.1 years

Question 2:

Answer: 3.6 years

For Project B,

Initial fixed investment =$400,000

annual net cash inflows = $110,000

so, Payback period = $400,000/$110,000 = 3.6 years

Question 3:

Answer: Both A & B

Because both projects return the initial investment in less than 5 years.

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