C 10-1 Three separate projects each have an initial cash outlay of $10,000. The cash flow for Peter's

Financial Management Principles and Practice 4th ed

By Gallagher and Andrew

Payback

C 10-1 Three separate projects each have an initial cash outlay of $10,000. The cash flow for Peter's Project is $4,000 per year for 3 years. The cash flow for Paul's project is $2,000 in years 1 and 3, and $8,000 in year 2. Mary's Project has a cash flow of $10,000 in year 1, followed by $1,000 each year for years 2 and 3.

a) Use the payback method to calculate how many years it will take for each project to recoup the initial investment.

b) Which project would you consider most liquid?  SOLUTION