Exercise 26 2 $7,630 $10,900 14,270 Total Compute each projects payback penod. (

Question

Exercise 26 2 $7,630 $10,900 14,270 Total Compute each projects payback penod. (Round ansuers to 2 decimal places, e.g. 15.25. Which is the most deirable pro;ect? h the least desrabe project lesirable ninct baned on perback period i. Compute the net present alue of each project (Eater ngtive amouots using eitber a oegative sign preceding the oumber c.g. 45 or parentheses e. (45). Round fieal ansers to the nearest whole donar, e.g. 5,275. For calculetion purposes, use 5 decimal places as displayed in the factor table Which : th" mnet danreb -rer.rt hERd en net prRRrt V."g? The most desrab e projedt bases on net present vsue is [ Which is the least dairabie prot based on net present value? The leest desirsble project based on net present value is

Explanation / Answer

Step 1:Computation of Payback period of each project

Payback Period=Initial Investment/ Cash Inflow per period

Payback Periods:

Project AA: 2.56 Years

Project BB: 2.2 years

Project CC: 1.75 Years

Answers:

i)The most desirable project based on payback period is Project CC

ii) The least desirable project based on payback period is Project AA

Step 2:Computation of NPV of each project

Answers:

i)The most desirable project based on NPV is Project CC

ii)The least desirable project based on NPV is Project AA

Year Project AA Cumm Cash Flow AA Project BB Cumm Cash Flow BB Project CC Cumm Cash Flow CC 0 ($23,980) ($23,980) ($23,980) ($23,980) ($23,980) ($23,980) 1 $7630 $16350 $10900 $13080 $14170 $9810 2 $9010 $7340 $10900 $2180 $13000 ($3190) 3 $13080 ($5740) $10900 ($8720) $11990 ($15180)

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