Reference no: EM132967019

Assume a $40,000 investment and the following cash flows for two alternatives.

Year          Investment A           Investment B

1                $10,00                       10,000

2                10,000                       20,000

3                  15,000                      25,000

4                     10,000                      -

5                     20,000                        -

Problem a. Calculate the payback for investments A and B. (Round your answers to 2 decimal places.)

Problem b. Which investment would you select under the payback method?

multiple choice 1

Investment A
Investment B

Problem c. If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method?

multiple choice 2

Yes
No