Computing the payback period. The Stanford Company is considering an investment of $100,000 in only one of

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Computing the payback period. The Stanford Company is considering an investment of $100,000 in only one of two proposed projects. The first project, which has an estimated useful life of 5 years, will produce a net increase in cash earnings of $30,000 per year. The second project has an estimated useful life of 10 years and will produce a net increase in cash earnings of $24,000 per year.

Compute the payback period for each of the proposals. Would you suggest that the project with the shortest payback period be the one chosen? Explain.

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