Question 1107721: A company is considering investing on a particular project. The alternative projects available are: Project A that costs $. 300,000, and Project B that Costs $. 170,000. The net cash inflows estimates are as follows:
Net Cash Inflow
Year Project A Project B
1 40,000 30,000
2 50,000 50,000
3 90,000 70,000
4 100,000 30,000
5 40,000 45,000
A. Calculate payback period for each project
B. Which project do you think will have shorter payback period?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! i believe you need to provide the discount rate as well.
i didn't see it anywhere.
you would then need to get the present valueof the net cash flow for each project.
you would then need to calculate the cumulative sum of the present value of the net cash flow for each time period.
the payback period is the time from when the study starts to the time when the cumulative net present value of the project turns positive and stays positive.
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