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he Short-Line Railroad is considering a $110,000 investment in either of two companies. The cash flows are as follows: Year Electric Co. Water Works 1
he Short-Line Railroad is considering a $110,000 investment in either of two companies. The cash flows are as follows:
Year | Electric Co. | Water Works | ||||
1 | $80,000 | $15,000 | ||||
2 | 15,000 | 15,000 | ||||
3 | 15,000 | 80,000 | ||||
4 10 | 15,000 | 15,000 | ||||
a. Calculate the payback period for the investment in Electric Co. and Water Works.
Payback period | |||
Investment A | years | ||
Investment B | years | ||
b. Which of the alternatives would you select under the payback method?
multiple choice
Electric Co.
Water Works
Both
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