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Homework: Chapter 10 Homework Save Score: 0 of 1 pt 2 of 9 lo complete HW...

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Homework: Chapter 10 Homework Save Score: 0 of 1 pt 2 of 9 lo complete HW Score: 0%, 0 of 9 pts P10-4 (similar to) Question H
Homework: Chapter 10 Homework Save Score: 0 of 1 pt 2 of 9 lo complete HW Score: 0%, 0 of 9 pts P10-4 (similar to) Question Help Long-term investment decision, payback method Personal Finance Problem Bil Williams has the opportunity to invest in project that costs $9.900 today and promises to pay $2.300 $2.500, $2.500 $2,100 and $1.800 over the next 5 years. Or, Bill can invest $9.900 in project that promises to pay $1.500, $1.500, $1.500, $3.700 and $4,100 Over the next 5 years Hint For m ed rem casino calculate cumulative cash flows on a year to year basist the initial investment is recovered) . How long will take for recoup his initial investment in project A? b. How long will take for at recoup his initial investment in project B? c. Using the payback period, which project should all choose? d. Do you see any problems with this choice? # For to recoup his initial investment in project it will take years. (Round to two decimal places) Enter your answer in the answer box and then click Check Answer 3 Clear All Check Air

Answers

rate positively ..

Cash flow Cumulative cash flow
Year Project A Project B Project A Project B
0 -9900 -9900 -9900 -9900
1 2300 1600 -7600 -8300
2 2600 1600 -5000 -6700
3 2600 1600 -2400 -5100
4 2100 3700 -300 -1400
5 1800 4100 1500 2700
Ans a) Payback periof of A= 4+300/1800
         4.17 Year
Ans b) Payback periof of B= 4+1400/4100
         4.34 Year
Ans c) Based on payback project A will be selected.
Ans d) Payback period does not take into account the time value of money. Therefore its not best method.
.

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