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Problem 12-8 Payback method [LO12-3] Assume a $95,000 investment and the following cash flows for...

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Finance

Problem 12-8 Payback method [LO12-3]

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

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

Investment A

Investment B

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?

Yes

No

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