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Assume a $80,000 investment and the following cash flows for two alternatives. Year Investment A Investment B 1 $ 20,000 $ 20,000 2 30,000 30,000
| Assume a $80,000 investment and the following cash flows for two alternatives. |
| Year | Investment A | Investment B | ||||
| 1 | $ | 20,000 | $ | 20,000 | ||
| 2 | 30,000 | 30,000 | ||||
| 3 | 15,000 | 40,000 | ||||
| 5 | 20,000 | |||||
| 5 | 20,000 | |||||
| a. | Calculate the payback for investment A and B. (Round your answers to 2 decimal places.) |
| Payback | ||
| Investment A | years | |
| Investment B | years | |
| b. | Which investment would you select under the payback method? | ||||
|
| c. | If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method? | ||||
|
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Options Futures And Other Derivatives
Authors: John C. Hull
7th Edition
0136015867, 9780136015864
