Project A requires an immediate outlay of $450,000. Profits are forecasted to be $100,000 starting in year two until year seven. The residual value will be $75,000 at the end of year seven. Project B requires an immediate outlay of $550,000, with forecasted profits of $125,000 for seven years. There is no residual value. Rank the projects based on their payback period.

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The Answer of Project A requires an immediate outlay of $450,000. Profits are forecasted to be $100,000 starting in year two until year seven. The residual value will be $75,000 at the end of year seven. Project B requires an immediate outlay of $550,000, with forecasted profits of $125,000 for seven years. There is no residual value. Rank the projects based on their payback period.

Project a Requires an Immediate Outlay of $450,000