Long-term investment decision, payback method Personal Finance ProblemBill Williams has the opportunity to invest in project A that costs

$ 6 comma 100$6,100

today and promises to pay

$ 2 comma 200$2,200,

$ 2 comma 600$2,600,

$ 2 comma 600$2,600,

$ 2 comma 100$2,100

and

$ 1 comma 800$1,800

over the next 5 years. Or, Bill can invest

$ 6 comma 100$6,100

in project B that promises to pay

$ 1 comma 400$1,400,

$ 1 comma 400$1,400,

$ 1 comma 400$1,400,

$ 3 comma 600$3,600

and

$ 3 comma 900$3,900

over the next 5 years.

(Hint:

For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is

recovered.)

a.How long will it take for Bill to recoup his initial investment in project A?

b.How long will it take for Bill to recoup his initial investment in project B?

c.Using the payback period, which project should Bill choose?

d.Do you see any problems with his choice?