Calculate the Payback Period for Each of the Following Mutually

question 79

Essay

Calculate the payback period for each of the following mutually exclusive projects, then comment on the advisability of selection based on the payback period criterion: Project A has a cost of $15,000, returns $4,000 after-tax the first year with this amount increasing by $1,000 annually over a 5-year life; Project B costs $15,000 and returns $13,000 after-tax the first year, followed by 4 years of $2,000 per year. The firm uses a 10% discount rate.

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Definitions:

Middle Ear Infection

An infection located in the air-filled space behind the eardrum, commonly causing earache and sometimes fever.

Medications

Substances used to diagnose, treat, mitigate, cure, or prevent disease or promote health.

Tinnitus

A condition characterized by hearing ringing, buzzing, or other noises in the ears without an external sound source.

Buzzing Sound

A continuous, vibrating noise, which can be heard in various contexts such as in tinnitus or machinery operation.