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Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as folows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years respectively.

TIME Project A Cash Flow Project B Cash Flow

0 -1,000 -500

1 300 200

2 400 400

3 700 300

- Calculate the payback and use the payback decision rule to evaluate these projects; which one(s) should be accepted or rejected and why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92824447

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