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Bernie’s, Sander Company is considering making a $35,000 investment and is expecting the following cash flows for two potential alternatives.

Year   Investment X   Investment Y

1   $ 5,000   $10,000

2   7,000   15,000

3   9,000   20,000

4   11,000   —

5   12,000   —

a. Which of the alternatives would Bernie’s select under the payback method?

b. If the inflow in year six for Investment X was $90,000, would your answer change under the payback method?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91779277

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