Net Cash Flow Determinations

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 an annual net cash flow of $40,000. The Beta Project will cost $200,000 to develop and is expected to have an annual cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?

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...a Project - Payback period:

Initial investment/Annual cash inflow
= $200,000/$50,000
= 4 years

Using the payback period, Alpha ...