EcoLiving Solutions is evaluating two projects with the following net cash flows. The company's required...
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EcoLiving Solutions is evaluating two projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1).
Year | Project EcoLiving1 | Project EcoLiving2 |
0 | $(550,000) | $(600,000) |
1 | $140,000 | $130,000 |
2 | $180,000 | $170,000 |
3 | $220,000 | $210,000 |
4 | $260,000 | $250,000 |
a. Compute the payback period for each project. Based on the payback period, which project is preferred?
b. Compute the net present value for each project. Based on the net present value, which project is preferred?
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