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Ad libitum [116K]
3 years ago
12

Coffer Co. is analyzing two potential investments.

Business
1 answer:
MakcuM [25]3 years ago
4 0

Answer:

d. Project X

Explanation:

For Project X

Year       Net cash outflow             Net cash inflow Balance

0              -$77,000                        -$77,000

1               $28,000                        -$49,000

2               $28,000                       -$21,000

3                $28,000                        $7,000

4                    0                               $7,000

Payback period = 2 + $21,000 ÷ $28,000

= 2 + 0.75

= 2.75 years

For Project Y

Year       Net cash outflow          Net cash inflow Balance

0              -$55,000                       -$55,000

1                $2,000                         -$53,000

2               $25,000                       -$28000

3                $25,000                       -$3,000

4                $20,000                       $17,000

Payback period = 3 +3,000 ÷ 20,000

= 3 + 0.15

= 3.15 years

Project X has a lesser than 3 year payback period. So, the correct option is D

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4 years ago
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Answer:

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