Explain why the answer in part a can be misleading

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Reference no: EM13280346

The B & O Railroad is considering a $100,000 investment in either of two companies. The cash flows are as follows:

Year Electric Company Water Works

1 $70,000 $15,000

2 15,000 15,000

3 15,000 70,000

4-10 10,000 10,000

a. Using the payback method, what will the decision be?

b. Explain why the answer in part a can be misleading.

Reference no: EM13280346

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