Cash flows for two potential alternatives

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Reference no: EM131054866

Bernie’s, Sander Company is considering making a $35,000 investment and is expecting the following cash flows for two potential alternatives.

Year Investment X Investment Y

1 $ 5,000 $10,000

2 7,000 15,000

3 9,000 20,000

4 11,000 —

5 12,000 —

a. Which of the alternatives would Bernie’s select under the payback method?

b. If the inflow in year six for Investment X was $90,000, would your answer change under the payback method?

Reference no: EM131054866

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