The Investment Detective
Answer #4 please
18
The Investment Detective The essence of capital budgeting is to determine which projects are worth investing in. All the projects listed have a cost of $2 million. Most of the capital has a discount rate of 10%, which is an appropriate rate for the risk involved.
What criteria might you use to evaluate the projects? Exhibit
Project number
1 5(2,000)
3 5(2,000)
5(2,000) $2,208*
cash benefit
$10,000
$3,310
$10,006
$3,560
$4,201
$2,206
$2,560 $4,150
$8,156
$2,200
$2,560
$2,150
What is the payback investment criterion? What are its benefits and deficiencies? Based on the payback, which project would be the best choice?