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Innovative Solutions Ltd has two projects under consideration with the following cash flows. The company's required...

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Accounting

  1. Innovative Solutions Ltd has two projects under consideration with the following cash flows. The company's required rate of return is 7%. PV of $1 (5%), PVA of $1 (5%), PV of $1 (7%), and PVA of $1 (7%).

Year

Project I

Project J

0

$(400,000)

$(320,000)

1

$100,000

$70,000

2

$110,000

$80,000

3

$120,000

$90,000

4

$130,000

$100,000

a. Determine the payback period for each project. Which project has the shorter payback period? b. Determine the net present value for each project. Which project has the higher NPV?

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