If the present value of the expected net cash flows from a machine, discounted at 10%, exceeds the amount to be invested, what can you say about the investments expected rate of return? What can you say about the expected rate of return if the present value of the net cash flows, discounted at 10%, is less than the investment amount? In which scenario, if either, should the machine be purchased?

Identify two disadvantages of using the payback period for comparing investments. Why is an investment more attractive to management if it has a shorter payback period?