Company XYZ is considering an investment of $100,000. The useful life of the project is 10 years. The cut off period is three (3) years. The board of the directors has identified two alternatives A and B. The expected annual cash flows are as follows:

Cost of Cash Flow	Alternative A	Alternative B
Initial Cost	($100,000)	($100,000)
Cash Flow Year 1	35000	35000
Cash Flow Year 2	28000	35000
Cash Flow Year 3	32000	35000
Cash Flow Year 4	40000	35000

1. Calculate the payback period for Alternative A and B

2. Briefly explain which alternative should be selected based on the payback method

3.What are the limitations of using such a method(payback method) to appraise investment?