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NEW QUESTION: 1
There is two projects to choose the best one. Project X has a payback period of
26 months. Project Y has a cost of $500,000, with expected cash inflows of $200,000 the first year and $50,000 per quarter after that. Which project should you recommend?
A. Project X because of lower payback period.
B. Project Y because of payback period 25.
C. Project Y because ofheigher payback period.
D. Project Y because of payback period 30.
Answer: A
Explanation:
Project Y has a cost of $500,000. After 1 year remaining cost is $500,000 - $200,000 = $300,000.
< li > peried for remaining cost is $300,000 / $50,000 = 6 quater = 6*3 months = 18
months.
< li >Total payback period for project Y = 1 year + 18 months = 30 months
< li >The lower the payback period, the better.


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