Q1) Coffer Co. is analyzing two projects for future. Suppose that only one project can be selected.
| |
Project X |
Project Y |
| Cost of machine |
$68,000 |
60,000 |
| Net cash flow: |
| Year 1 |
24,000 |
4,000 |
| Year 2 |
24,000 |
26,000 |
| Year 3 |
24,000 |
26,000 |
| Year 4 |
0 |
20,000 |
If company is using payback period method and it needs payback of three years or less, which project must be selected?
A. Project X.
B. Neither X nor Y is an acceptable project.
C. Both X and Y are acceptable projects.
D. Project Y.
E. Project Y because it has a lower initial investment.