XYZ Company has two good businesses. Each has an initial investment of $ 25,000 with each...

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Finance

XYZ Company has two good businesses. Each has an initialinvestment of $ 25,000 with each cash flow as follows:
Year Business 1 Cash Flow Business 2 Cash Flow
1                                     7,500                                      7,500
2                                     7,000                                      7,500
3                                     6,000                                      7,500
4                                     5,000                                      7,500
5                                     3,500                                      7,500
If the cost of capital is 12.5%, calculate:
A. Payback Period and NPV
B. In your opinion, which business is better chosen?Business 1 and Business 2? And Why?

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Step1Calculation of payback period Payback period is the time within cost of project is recovered back Payback period is calculated as follows Business 1 Business 2 Year Cash flows Cumulative Cash flows Cash flows Cumulative Cash flows 0 See Answer

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Year	Business 1 Cash Flow	Business 2 Cash Flow
1	7,500	7,500
2	7,000	7,500
3	6,000	7,500
4	5,000	7,500
5	3,500	7,500