Question

Elysian Fields, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusive projects. Project Hydrogen requires an initial outlay of $28,000 project Helium requires an initial outlay of $34,000. Using the expected cash inflows given for each project in the following table, , calculate each project's payback period. Which project meets Elysian's standards? years. (Round to two decimal places.) The payback period of project Hydrogen is The payback period of project Helium is years. (Round to two decimal places.) Which project meets Elysian's standard? (Select the best answer below.) Only project Hydrogen meets Elysian's standard. Both projects are acceptable because their payback periods are less than the 6 years criterion Only project Helium meets Elysian's standard.

Answer 1

Hydrogen Helium Cashflows $ (28,000.00) $ 6,500.00 $ 6,500.00 $ 7,500.00 $ $ Cumulative cashflow (34,000.00) (27,000.00) (19,000.00) (10,500.00) (5,500.00) (500.00) Cumulative cashfleCashflows (28,000.00) $(34,000.00) $ (21,500.00) 7,000.00 $ (15,000.00) $ 8,000.00 $ (7,500.00) $ 8,500.00 $ (4,000.00) $ 5,000.00 $ (1,500.00) 5,000.00 $ 1,000.00 $4,500.00 $ Year 0 1 2 3,500.00 $ 2,500.00 $ 2,500.00 $ 4 $ 4,000.00 6 5+1500/2500 5+500/4500 Payback period 5.11 Years 5.60 Years Both Projects are accepted,since both payback period is lessthan maximum payback Accept both A &B