Assume a $95,000 investment and the following cash flows for two alternatives. Year Investment A Investment B 1 $ 35,000 $ 40,000 2 30,000 35,000 3 20,000 25,000 4 20,000 — 5 20,000 — a. Calculate the...

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Finance

Assume a $95,000 investment and the following cash flows for twoalternatives.
Year Investment A Investment B
1 $ 35,000 $ 40,000
2 30,000 35,000
3 20,000 25,000
4 20,000 —
5 20,000 —

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


b. Which investment would you select under thepayback method?

Investment A
Investment B

c. If the inflow in the fifth year for InvestmentA was $20,000,000 instead of $20,000, would your answer changeunder the payback method?

Yes
No

Answer & Explanation Solved by verified expert

4.2 Ratings (781 Votes)

aInvestment A Payback period full years until recovery unrecovered cost at the start of the yearcash flow during the year 3 See Answer

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Assume a $95,000 investment and the following cash flows for twoalternatives.YearInvestment AInvestment B1$35,000$40,000230,00035,000320,00025,000420,000—520,000—a. Calculate the payback for investment A and B.(Round your answers to 2 decimal places.) b. Which investment would you select under thepayback method? Investment AInvestment Bc. If the inflow in the fifth year for InvestmentA was $20,000,000 instead of $20,000, would your answer changeunder the payback method? YesNo

Year	Investment A		Investment B
1	$	35,000	$	40,000
2		30,000		35,000
3		20,000		25,000
4		20,000		—
5		20,000		—