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Payback method

I'm trying to determine which of these 2 project would be a better choice to accept: I my firm requires a payback of 3 years or sooner....and both projects have an initial investment of $30,000
Project A -- gives you $10,000 in year 1, $10,000 in year 2, $10,000 in year 3.....and $15,000 in year 4
Project B -- gives you $15,000 in year 1, $5,000 in year 2, $10,000 in year 3 ....and $20,000 in year 4

Solution Preview

Payback is the time taken to recover the initial investment.
In Project A, the initial investment is 30,000 and it gives 10,000 in year 1, 2 and 3. The total inflow in 3 years is ...

Solution Summary

The solution explains how to calculate the payback period.

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