11-47 question

or why not? on the initial investment. 11-47 Weaknesses of the Payback Model ment of $36,000. Investment A will provide a cash flow of $4,000 at the end of each year for 20 years. Stallone Company is considering two possible investments, each of which requires an initial invest- Investment B will provide a cash flow of $4,500 at the end of each year for 8 years. 1. Determine the payback period for each investment. Which investment is most desirable using the 2. Compute the NPV of each investment using a required rate of return of 8%. Which investment is most desirable using the NPV method? 3. Explain why the payback method does not lead to an optimal decision for the Stallone Company. 11-48 Comparison of Capital-Budgeting Techniques The City of Industry parks department is considerinn payback method