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Capital Budgeting: PAYBACK Given:                              Project A      &

Capital Budgeting:

PAYBACK

Given:                              Project A                 Project B

Initial Investment          $200,000                   $300,000

Cash Flows:

1                                         $50,000                   $100,000

2                                         $50,000                   $100,000

3                                         $50,000                   $100,000

4                                         $50,000                     $50,000

5                                          $37394                     $45,778

a. What is ‘Payback’ for each project?

b. Choose ‘Payback’ ‘winner’.

c. Cite advantage/disadvantage associated with ‘Payback’.

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