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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.

YearInvestment AInvestment B
1$35,000$40,000
230,00035,000
320,00025,000
420,000—
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 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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Transcribed Image Text

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

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