Question
Assume a company is going to make an investment of $460,000 in a machine and the following are the cash flows that two different products
Assume a company is going to make an investment of $460,000 in a machine and the following are the cash flows that two different products would bring in years one through four.
| Option A, Product A | Option B, Product B |
| $195,000 | $145,000 |
| 195,000 | 180,000 |
| 60,000 | 60,000 |
| 20,000 | 85,000 |
A. Calculate the payback period of each product. Round your answers to 2 decimal places.
| Option A, Product A | ___ years |
| Option B, Product B | ___2 years |
B. Which of the two options would you choose based on the payback method?
(Option A, Product A; Option B, Product B)
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Exploring Economics
Authors: Robert L Sexton
5th Edition
978-1439040249, 1439040249
