Question
Assume a $85,000 investment and the following cash flows for two alternatives. Year Investment A Investment B 1 $25,000 $35,000 2 35,000 35,000 3 25,000
Assume a $85,000 investment and the following cash flows for two alternatives.
| Year | Investment A | Investment B |
| 1 | $25,000 | $35,000 |
| 2 | 35,000 | 35,000 |
| 3 | 25,000 | 20,000 |
| 4 | 20,000 | -- |
| 5 | 20,000 | -- |
b. Which investment would you select under the payback method?
| Investment A | |
| Investment B |
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?
| Yes | |
| No |
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
16th Edition
013749601X, 978-0137496013
