Coffer CoIs Analyzing Two Projects for the Future If the Company Is Using the Payback Period Method and One

question 144

Multiple Choice

Coffer Co.is analyzing two projects for the future.Assume that only one project can be selected.

$\begin{array} { l r r }&\underline{\text{Project X}}&\underline{\text{Project Y}}\\\text{Cost of machine} & \$ 68,000 & \$ 60,000 \\\text{Net cash flow:} & & \\\text{Year 1} & 24,000 & 4,000 \\\text{Year 2} & 24,000 & 26,000 \\\text{Year 3} & 24,000 & 26,000 \\\text{Year 4} & 0 & 20,000\end{array}$


If the company is using the payback period method and it requires a payback of three years or less,which project should be selected?

• A) Project Y.
• B) Project X.
• C) Both X and Y are acceptable projects.
• D) Neither X nor Y is an acceptable project.
• E) Project Y because it has a lower initial investment.