UVW Ltd. is considering two projects, Project Sun and Project Moon, requiring initial investments of...
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Accounting
UVW Ltd. is considering two projects, Project Sun and Project Moon, requiring initial investments of EUR 90,000 each. The cash flows are as follows:
Year | Cash Flows (Project Sun) | Cash Flows (Project Moon) |
Initial Investment | (90,000) | (90,000) |
1 | 35,000 | 30,000 |
2 | 30,000 | 25,000 |
3 | 25,000 | 20,000 |
4 | 20,000 | 15,000 |
a. Compute the Payback Period for each project.
b. Which project should the company invest in based on the shortest payback period?
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