OptiNet is considering two projects with the following net cash flows. The discount rate is...
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OptiNet is considering two projects with the following net cash flows. The discount rate is 10%. (PV of $1 = 0.909, PVIFA of $1 = 3.791, FV of $1 = 1.100, FVA of $1 = 4.641)
Year | Project G Cash Flow | Project H Cash Flow |
0 | $(800,000) | $(700,000) |
1 | $220,000 | $180,000 |
2 | $280,000 | $220,000 |
3 | $320,000 | $260,000 |
4 | $360,000 | $300,000 |
5 | $400,000 | $340,000 |
a. Compute the payback period for both projects. Which project is better based on the payback period?
b. Determine the net present value for each project. Which project is better based on the net present value?
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