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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?
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