posted 2¼years ago by Natalie2000
© Copyright: Project Management Professional (PMP) Study Guide by Kim Heldman, Sybex Inc., Alameda, CA, USA, 2002, page 42, question 48
Cost Management | Cost/Benefit Analysis
You are a project manager for Swirling Seas Cruises food division. You’re considering two different projects regarding food services on the cruise lines. The initial cost of Project Fish’n for Chips will be $800,000 with expected cash inflows of $300,000 per quarter. Project Picnic’s payback period is six months. Which project should you recommend?
A. Project Fish’n for Chips because its payback period is two months shorter than Project Picnic’s
B. Project Fish’n for Chips because the costs on Project Picnic are unknown
C. Project Picnic because Project Fish’n for Chips’ payback period is four months longer than Project Picnic’s
D. Project Picnic because Project Fish’n for Chips’ payback period is two months longer than Project Picnic’s
george (2¼years ago):
Answer is D. Picnic project payback is 6 months. Fish'n for Chips payback period is 8 months, because it gives cash back approximately 100,000 per month with initial investment of 800,000. Thus, it will take 8 months to give cash back.
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