Capital Budgeting e-Activity
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1. Based on the e-Activity, if your superior negated your analysis and chose Project B due to payback period, explain how you would justify the financial implications in choosing Project A.
2. Based on the e-Activity and your response above, revise Project B so as to make it an acceptable alternative to Project A.
(In your justification, explain why you think Project A would be a better choice than Project B. Explain the details related to the critical acceptance level and payback period). (Please reply in 100 words or more for each question)
3. Using the e-Activity and your response to Discussion 1, revise Project B as an alternative approach to using the payback period of Project A. In the discussion, please explain front loading a project, Payback Period, IRR, and NPV for each.
Please break out the answers as follows:
Project A Project B
Payback Period X years X years
Internal Rate of Return x% x%
Net Present Value $ $
Part I: http://www.youtube.com/watch?v=Pq67NLTCaa0&feature=related (6 min 43 s)
Part II: http://www.youtube.com/watch?v=NcyuOTQV5Jc&feature=related (6 min 20 s)
Part III: http://www.youtube.com/watch?v=1iwmcJCVu9I&feature=related (5 min 8 s)
Part IV: http://www.youtube.com/watch?v=q_tfPX9u8w4&feature=related (6 min 31 s)
Thank you! I appreciate your assistance!
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Solution Summary
The expert examines capital budgeting and e activity.
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1. Project A has payback period of 1.75 years and Project B has payback period of 3.75 years. So going by the concept of payback period we should choose project A as it has early payback. Project A has outflow of $200,000 while project B has outflow of $400,000. Project A has maximum inflow of $120,000 in the first year itself. Hence, benefits are received early in the life of project which is more in real terms than same benefits which are given by project B in distant ...
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