Using the Payback Period Method to Identify the Best Project

Two new software development projects are proposed to a young, start-up company. The Alpha project will cost $300,000 to develop and is expected to have annual net cash flow of $40,000. The beta project will cost $200,000 develop and is expected to have annual net cash flow of $40,000. The company is very concerned about their cash flow. Using the payback period method, which project is better from a cash flow standpoint? Why?

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