Porter Co Is Analyzing Two Projects for the Future - If the Company Is Using the Payback Period Method

Multiple Choice

Porter Co. is analyzing two projects for the future. Assume that only one project can be selected. $$\begin{array} { l r r } & \text { Project X } & \text { Project } Y \\\text { Cost of machine } & \$ 68,000 & \$ 60,000 \\ \text { Net cash flow: }\\\text { Year 1 } & 24,000 & 4,000 \\\text { Year } 2 &24,000 & 26,000 \\\text { Year 3 } & 24,000 & 26,000\\\text { Year 4 } & 0 & 20,000 \\\end{array}$$
- If the company is using the payback period method and it requires a payback of three years or less, which project should be selected?

A) Project Y.
B) Project X.
C) Neither X nor Y is an acceptable project.
D) Both X and Y are acceptable projects.
E) Project Y because it has a lower initial investment.