Atlantis Inc. is considering two mutually exclusive projects with the following cash flows: $\begin{array}{llllll}
\text { Year } & 0 & 1 & 2 & 3 & 4 \
\text { Project A } & (\$ 120,000) & \$ 60,000 & \$ 40,000 & \$ 60,000 & \$ 80,000 \
\text { Project B } & (\$ 100,000) & \$ 60,000 & \$ 50,000 & \$ 0 & \$ 0
\end{array}$ If Atlantis accepts projects that pay back in two years or less, which should be undertaken?

Question

Quizplus · Accepted Answer

Project B pays back in two years with cash flows of $60,000 in year 1 and $50,000 in year 2, totaling $110,000, which covers the initial $100,000 investment. Project A does not pay back within two years.

Atlantis Inc If Atlantis Accepts Projects That Pay Back in Two Years