- 7 A Company Uses The Payback Method To Evaluate Capital Budgeting Projects It Is Currently Considering Projects A B A 1 (69.95 KiB) Viewed 32 times
7) A company uses the payback method to evaluate capital budgeting projects. It is currently considering projects A, B and C. Project A Project B Project C Initial cost (cash outflow) $10,000 $10,000 $10,000 Cash Inflows 1st Year $3,000 $4,000 $5,000 $3,000 $3.000 $5,000 2nd Year 3rd Year $12,000 $3,000 $5,000 a) Find the payback period for each of the above capital budgeting projects. Label the payback period for each project so I can see which payback period goes with which project. b) Based on the payback method, which project would you choose? c) What two major weaknesses of the payback method are illustrated by this problem? Explain each.