What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $150,000?
What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $150,000?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...
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Jan Booth is considering investing in either a storage facility or a car wash facility. Both projects have a five-year life and require an investment of $360,000. The cash flow patterns for each project are given below.
Storage facility: Even cash flows of $120,000 per year
Car wash: $112,500, $142,500, $60,000, $120,000, and $90,000
Required:
- Calculate the payback period for the storage facility (even cash flows).
years - Calculate the payback period for the car wash facility (uneven cash flows). Round your answer to three decimal places.
years
Which project should be accepted based on payback analysis?
- What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $150,000?
Now which project would be chosen?
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