Question

Jill Harrington, a manager at Jennings Company, is considering several potential capital investment projects. Data on these projects follow Initial investment Annual cash inflows PV of cash inflows Project X $40,000 25,000 45,000 Project Y $20,000 10,000 33,000 Project Z $50,000 25,400 70,000 Required: 1. Compute the payback period for each project and rank order them based on this criterion. (Round your answers to 2 decimal places.) Payback Period Rank Project X Project Y Project Z

Answer 1

1 computation of payback period a payback period . Initial anvestment R Annual cash inflows out payback period of Rank I project x I project y T 1.6 years $ 40000 $25000 2 years $ 20000 $ 10 000 197 years $50ooo $ 25400 project a 1

2) computation of Nov loger NPV = present value of cash inflows] Doop ( Initial anvestment E I project x sl. NPV x Rank sonce $5000 3 JOB $45000 - $ 40000) cost $ 13000 72 ODOS C$33000 -$ 20000 I project project z 00 $ 20,000 $ TO 000 - $50000

3) computation of profitability anden profitability andere = present oaklee of cash anflows Intialanoesturent. Rank 3 project x Tramont - woon I progect y Pl 1.13 $45000 $ 4oooo 1.65 $ 33000 1$ 20000 project Z $70ooo 050 000