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coffer company is analyzing two potential investments. project x project y cost of machine $ 74,340 $ 58,000 net cash flow: year 1 29,500 2,300 year 2 29,500 26,500 year 3 29,500 26,500 year 4 0 27,000 if the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected?
coffer company is analyzing two potential investments. project x project y cost of machine $ 74,340 $ 58,000 net cash flow: year 1 29,500 2,300 year 2 29,500 26,500 year 3 29,500 26,500 year 4 0 27,000 if the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected?
Final answer:The payback period for Project X is exactly 3 years, while for Project Y it's longer than 3 years. Therefore, considering the company's requirement for a payback period of three years or less, Project X should be selected.Explanation:Thepayback periodmethod is used to assess the feasibility of an investment based on the time it takes to break even or recoup the initial investment. Projects with shorter payback periods are often preferred as they allow companies to recover their costs quickly.Considering both projects X and Y, we can calculate their payback periods. For project X, it takes approximately 3 years to recoup the initial investment of $74,340 (with an annual net cash flow of $29,500). For project Y, despite a lower initial investment of $58,000, the net cash flow in the first year is significantly lower ($2,300), increasing to $26,500 in years 2 and 3, and only in year 4 does it slightly surpass project X with $27,000. Therefore, the payback period for project Y is longer than 3 years.Given the company's requirement for a payback period of three years or less,Project X should be selected.Learn more about Payback Period here:brainly.com/question/34913988#SPJ11...