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Phoenix Technologies is considering two investment projects. The company’s required rate of return is 17%.Project...

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Accounting

Phoenix Technologies is considering two investment projects. The company’s required rate of return is 17%.

Project Sunrise:

  • Initial Investment: $(210,000)
  • Year 1: $75,000
  • Year 2: $80,000
  • Year 3: $85,000
  • Year 4: $95,000

Project Sunset:

  • Initial Investment: $(220,000)
  • Year 1: $70,000
  • Year 2: $75,000
  • Year 3: $90,000
  • Year 4: $100,000

a. Compute the payback period for each project. Based on the payback period, which project is preferred?

b. Compute the net present value (NPV) for each project. Based on NPV, which project is preferred?

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