A company is trying to decide which of two new product lines to introduce in the coming year.The predicted revenue and cost data for each product line follows:
The company has a 30% tax rate,it uses the straight-line depreciation method,and it predicts that cash flows will be spread evenly throughout each year.Calculate each product's payback period.If the company requires a payback period of three years or less,which,if either,product should be chosen?
Definitions:
Probability
A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.
Poisson Random Variable
A type of discrete random variable that expresses the probability of a given number of events occurring in a fixed interval of time or space.
Poisson Probabilities
Probabilities calculated under the assumption of a Poisson distribution, typically used to model the number of times an event occurs in a fixed interval of time or space.
Calculate
To determine something mathematically, often by using a specific formula or procedure.
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