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sparkle101
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$5.00 I need assistance with this asap

• From Business: Finance , Business: Accounting
• Closed, but you can still post tutorials
• Due on Aug. 10, 2009
• Asked on Aug 09, 2009 at 3:12:52PM

Q:

. ABC Company is considering two long-term investment proposals. The initial outlay for Project L is $75,000, salvage value for the project is $25,000, and the expected after tax cash returns (including the salvage value) are given below throughout its expected 4 year useful life. Project M, if selected will have to be replaced after 5 years and cost $95,000. It will have no salvage value. Its expected cash inflows are also shown below.

YEAR PROJECT L PROJECT M
1 $25,000 31,000
2 30,000 35,000
3 25,000 40,000
4 30,000 23,000
5 15,000

What is the payback period (to the nearest tenth of a year) for each project? Using the payback method as the selection criteria, which project would you select?

 

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