The Short$-$Line Railroad is considering a $$135,000$ investment in either of two companies. The cash flows are as follows:

Year Electric Co$.$ Water Works

$1$ $$85,000$ $$15,000$

$215,00035,000$

$335,00085,000$

$41020,00020,000$

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