Business, 27.02.2020 20:48 Hrjohnson2004

X-treme Vitamin Company is considering two investments, both of which cost $18,000. The cash flows are as follows:

Year Project A Project B
1 $20,000 $18,000
2 8,000 7,000
3 7,000 12,000

a. Calculate the payback period for Project A and Project B.
b. Which of the two projects should be chosen based on the payback method?
c. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent.
d. Which of the two projects should be chosen based on the net present value method?
e. Should a firm normally have more confidence in the payback method or the net present value method?

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X-treme Vitamin Company is considering two investments, both of which cost $18,000. The cash flows a...

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