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XYZ Manufacturing is considering two projects with the following cash flows. The required return on investments is 12%.
Year | Project Alpha | Project Beta |
0 | -$50,000 | -$60,000 |
1 | $20,000 | $25,000 |
2 | $25,000 | $30,000 |
3 | $15,000 | $20,000 |
4 | $10,000 | $15,000 |
a. Calculate the payback period for each project. b. Compute the net present value for each project. Based on NPV, which project should be preferred?
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