Question

950 Sweet Inc. has two projects as follows: Project Initial CF CF1 CF2 CF3 CF4 А -2,450 850 1,200 1,900 -3,000 750 1,500 1,050 3,900 Sweet set 2.6 years as a cut-off period for screening projects and the discount rate is 14 percent. Which project(s) will be selected if the company uses the discounted payback period method? (Round intermediate calculations to 5 decimal places, B Project A payback period years Project B payback period years will be selected Neither project Project A Project B uestion Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Answer 1

Year 0 Project A Cumulative Cash Discounted discounted flows cash flows cash flows -2450 -2450 -2450 850 745.614035 -1704.38596 1200923.361034 -781.024931 9501 641.22294 - 139.80199 1900 1124.95253 985.15054 1 2 3 4

139.80199 Project A payback period = 3+ 1124.95253

Project A payback period = 3.12 years

Year 0 Project B Cumulative Cash Discounted discounted flows cash flows cash flows -3000 -3000 -3000 750 657.89474 -2342.10526 1500 1154.20129 -1187.90397 1050 708.72009 -479.18388 3900 2309.11308 1829.9292 1 2 3 4

479.18388 Project B payback period = 3+ 2309,11308

Project B payback period = 3.21 years

Project A payback period	3.12 years
Project B payback period	3.21 years

Neither project will be selected.

Explanation:- Both the projects have a payback period greater than the cutoff period of 2.6 years. Hence neither of the projects will be selected.