Investment A:

Year: 0 1 2 3 4 5

Cash flow:

$14,000

$4,000

$4,000

$4,000

$4,000

$4,000

Investment B:

Year: 0 1 2 3 4 5

Cash flow:

$15,000

$5,500

$5,500

$5,500

$5,500

$5,500

Investment C:

Year: 0 1 2 3 4 5

Cash flow:

$18,000

$12,000

$3,500

$3,500

$3,500

$3,500The cash flows for three projects are shown above. The cost of capital is

7.5%.

If an investor decided to take projects with a payback period two years or less, which of these projects would he take?

A.

Investment A

B.

Investment B

C.

Investment C

D.

none of these investments