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Payback Period & Net Present Value

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Your division is considering two investment projects, each of which requires an up-front expenditure of $20 million. You estimate that the investment will produce the following net cash flows:

Year Project A Project B
1 $10,000,000 $20,000,000
2 $5,000,000 $5,000,000
3 $15,000,000 $5,000,000

1. What is the payback period for each project?
2. What are the two projects' net present values, assuming the cost of capital is 10 percent? Round to whole dollars.

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Solution Summary

Word document shows how to find the pay-back period and net present value of two projects, given data on their investment returns.

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