Question

Cash Flow (payback period)

Offshore Drilling Products, Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projectsavailable.

Year Cash Flow A Cash Flow B
0 –$ 47,000 –$ 92,000
1 18,000 20,000
2 24,200 25,000
3 20,000 34,000
4 6,000 248,000

What is the payback period for each project?
Project A years?
Project B years?

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Requirement 2:
Should it accept either of them?

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