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Cash Flows: select an alternative under the payback method

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15. Assuming a $50,000 investment and the following two cash flows, which of the two alternatives would you select under the payback method of evaluating investments?

Year Investment A Investment B
1 $10,000 $20,000
2 11,000 25,000
3 13,000 15,000
4 16,000 _
5 30,000

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Solution Summary

The expert selects an alternative under the payback methods.

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Payback period = time in years when the initial investment is recovered

Payback Period for A = 4 years ($50,000 initial ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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