Two new software projects are proposed to a young, start-up company. The Alpha project will cost...

Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. a.) Using the payback period, which project is better from a cash flow standpoint? Why? b.) If the project will take 10 years and the discount rate is 10%, which project must be selected using the NPV method? Why? c.) Considering your answers to parts (a) and (b), what disadvantage(s) of payback period method do you observe?

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ekkarill92 answered 1 year ago

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