Paramount Carpets Company is considering purchasing new equipment costing $700,000. The company's management has estimated that the equipment will generate cash flows as follows: Year Net Cash Flow1 $200,0002 200,0003 250,0004 250,0005 150,000Considering the residual value is zero, calculate the payback period. The following details are provided by Doppler Systems: Project A Project B Project C Project D Initial investment $420,000 $200,000 $550,000 $500,000 PV of cash inflows $570,000 $380,000 $800,000 $390,000 Payback period (years) 3.6 3.2 4.0 2.0 NPV of project $150,000 $180,000 $250,000 -$110,000 If Doppler can fund only ONE of the four projects, which one should they fund AND WHY? (hint; consider the profitability indices)

Paramount Carpets Company is considering purchasing new equipment costing $700,000. The company's management has estimated that the equipment will generate cash flows as follows: Year Net Cash Flow 1...

Paramount Carpets Company is considering purchasing new equipment costing $700,000. The company's management has estimated that the equipment will generate cash flows as follows:

Year
Net Cash Flow

1 $200,000

2 200,000

3 250,000

4 250,000

5 150,000

Considering the residual value is zero,
calculate the payback period.

If Doppler can fund

only ONE

of the four projects, which
one
should they fund
AND
WHY?
(hint; consider the profitability indices)

Jun 09, 2022