JP Company is considering two capital investment proposals. Estimates regarding each project are provided below: $\begin{array}{lr}
&\text { Project Echo}&\text { Project Charlie }\
\text { Initial investment } & \$ 400,000&\$600,000 \
\text { Annual net income } & 20,000 &42,000\
\text { Net annual cash inflow } & 100,000&142,000 \
\text { Estimated useful life } & 5 \text { years } &6 \text { years } \
\text { Salvage value } & 0&0
\end{array}$ The company requires an 11% rate of return on all new investments. The cash payback period for Project Echo is

Question

JP Company is considering two capital investment proposals. Estimates regarding each project are provided below: $\begin{array}{lr}
&\text { Project Echo}&\text { Project Charlie }\
\text { Initial investment } & \$ 400,000&\$600,000 \
\text { Annual net income } & 20,000 &42,000\
\text { Net annual cash inflow } & 100,000&142,000 \
\text { Estimated useful life } & 5 \text { years } &6 \text { years } \
\text { Salvage value } & 0&0
\end{array}$ The company requires an 11% rate of return on all new investments.  The cash payback period for Project Echo is

Quizplus · Accepted Answer

The best choice is Project Delta as it has a higher net present value (NPV) than Project Echo. Additionally, Project Delta has a shorter payback period of 4 years compared to 5 years for Project Echo. Therefore, Project Delta is the better investment choice for JP Company.

JP Company Is Considering Two Capital Investment Proposals The Company Requires an 11% Rate of Return on All