Porter co. is analyzing two projects for the future. assume that only one project can be selected. project x project y cost of machine $ 68,000 $ 60,000 net cash flow: year 1 24,000 4,000 year 2 24,000 26,000 year 3 24,000 26,000 year 4 0 20,000 if the company is using the payback period method and it requires a payback of three years or less, which project should be selected

Company should go for project A.

Explanation: Payback period can be defined as time period taken by a firm from its cash inflows, to recover its initial outflow in that investment. It can be shown as follow :-  

Project X :-

The company  requires a payback of three years or less, therefore select Project X whose payback is 2.833 years.

Explanation:

Payback is the number of years it will take for the company to recover the initial investment.

Project X      

Year  Cash-flow  Balance

0        (68,000)      (68,000)

1          24,000        (44,000)

2          24,000     (20,000)

3         24,000     4,000  

4         -                4,000  

For Project X, at the end of year 2, the company still needs to recover $20,000.  At the end of year 3, the project is reflecting a positive cumulative balance, implying that payback was reached some month after year 2.

Project Y      

Year  Cash-flow  Balance  

0        (60,000)   (60,000)

1          4,000     (56,000)

2         26,000     (30,000)

3         26,000     (4,000)

4         20,000     16,000  

answer; possession utility;

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.