XYZ Industries is considering two capital budgeting projects. Project A requires an initial investment of $48,000. It is expected to produce net annual cash flows of $7,000. Project B requires an initial investment of $75,000 and is expected to produce net annual cash flows of $12,000. Using the cash payback technique to evaluate the two projects, Siegel should accept: (01) (a) Project A because it has a shorter cash payback period. (b) Project B because it has a shorter cash payback period. (c) Project A because it requires a smaller initial investment. (d) Project B because it produces a larger net annual cash flow.
XYZ Industries is considering two capital budgeting projects. Project A requires an initial investment of $48,000. It is expected to produce net annual cash flows of $7,000. Project B requires an initial investment of $75,000 and is expected to produce net annual cash flows of $12,000. Using the cash payback technique to evaluate the two projects, Siegel should accept: (01) (a) Project A because it has a shorter cash payback period. (b) Project B because it has a shorter cash payback period. (c) Project A because it requires a smaller initial investment. (d) Project B because it produces a larger net annual cash flow.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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XYZ Industries is considering two capital budgeting projects. Project A requires an initial investment of $48,000. It is expected to produce net annual cash flows of
$7,000. Project B requires an initial investment of $75,000 and is expected to produce net annual cash flows of $12,000. Using the cash payback technique to evaluate the two projects, Siegel should accept: (01)
(a) Project A because it has a shorter cash payback period.
(b) Project B because it has a shorter cash payback period.
(c) Project A because it requires a smaller initial investment.
(d) Project B because it produces a larger net annual cash flow.
3.
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