A23. (Capital budgeting—payback method) Allenby Corp. has $10 million to invest. Listed below are the expected...

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A23. (Capital budgeting—payback method) Allenby Corp. has $10million to invest. Listed below are the expected future cashinflows to be received for four alternative investments, inmillions of dollars.
Investment A,     Investment B,    Investment C,     InvestmentD
Year 1    7,     1,     0,    7
Year 2    1,     2,     0,    3
Year 3    2,     7,     3,    0
Year 4    2,     8,     7,    0
Year 5    2,     9,     10,    0
    A. Compare investments A and B.
        a. Compute the paybackperiods for Investments A and B.
        b. Which one would youpick, based only on payback period?
        c. Do you think one is abetter investment?

    B. Compare investments C and D.
        a. Compute the paybackperiods
        b. Which one would youpick, based on the payback periods?
        c. Do you think this isthe better investment? Why, or why not?

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3.9 Ratings (457 Votes)

Aa Payback peirod for Investment A and B 1 7 7 2 1 2 3 2 6 4 2 8 5 2 10 15 Years 33 million Average Return 331522 Million Payback period Investmentreturn 1022 4545 Years 1 1 1 2 2 4 See Answer

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