Question
You are preparing to recommend a highly risky electronics manufacturing investment. Your MARR is 18%. The first alternative has a return of 21.3% and a
You are preparing to recommend a highly risky electronics manufacturing investment. Your MARR is 18%. The first alternative has a return of 21.3% and a payback of 5 years. The second has a return of 21.1% and a payback of 3 years. Both options require the same initial investment. Which one do you pick and why?
You recommend the first alternative because it has a longer payback and hence you are getting paid back for a longer time.
You recommend the second alternative because it has a lower return hence it must be lower risk.
You recommend the first alternative because it has a substantially higher return hence you make more money.
You recommend the second alternative because it has a shorter payback hence you get paid back quicker.
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