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Answer: A
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You are the project manager at Day-Old donuts, a rapidly growing franchise selling premium donuts at discount. Currently your company is planning on opening additional store throughout United States. Your primary market includes densely-populated, metropolitan cities. Your company is evaluating different companies fro evaluation including New York, San Francisco, and Los Angles. Based on the following data which project is recommended?
Project New York-Initial cost of $250,000 First year cash flow$ 50,000. $25,000 cash flow per quarter after Project Los Angles-Initial cost of $200,000 First year cash flow$ 50,000. $12,500 cash flow per quarter after Project San Francisco-Pay back period of 24 months
A. Either project Los Angles or projectSan Francisco since the payback periods are the same
B. Project Los Angles since it has the shortest payback period
C. Project San Francisco since it has the shortest payback period
D. Either projectNew York or project San Francisco since the payback periods are the same
E. ProjectNew York since it has the shortest payback period
Answer: C
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