Problem:
Calculate the following two projects' payback period
| Year |
Panda Project |
Peacock Project |
| 0 |
-450 |
-450 |
| 1 |
350 |
100 |
| 2 |
100 |
350 |
| 3 |
30,000 |
3 |
Required:
Question 1: Assume we will accept the project with PP<= 3years.
Question 2: According to the PP rule, should we accept the Panda project? should we accept the peacock project?
Question 3: According to the NPV rule, should we accept the Panda project? should we accept the peacock project? (assume a 12% required rate of return)
Note: Please explain comprehensively and give step by step solution.