Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method? -option A, Product A or -option B, product B Cash Flow data Option A, Product A Option B, Product B $190,000 $150,000 190,000 180,000 60,000 60,000 20,000 70,000
Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method? -option A, Product A or -option B, product B Cash Flow data Option A, Product A Option B, Product B $190,000 $150,000 190,000 180,000 60,000 60,000 20,000 70,000
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 4EA: Assume a company is going to make an investment of $450,000 in a machine and the following are the...
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5.
Assume a company is going to make an investment of $450,000 in a machine and the following are the
-option A, Product A or
-option B, product B
Cash Flow data
| Option A, Product A | Option B, Product B |
|---|---|
| $190,000 | $150,000 |
| 190,000 | 180,000 |
| 60,000 | 60,000 |
| 20,000 | 70,000 |
6. If a garden center is considering the purchase of a new tractor with an initial investment cost of $120,000, and the center expects a return of $30,000 in year one, $20,000 in years two and three, $15,000 in years four and five, and $10,000 in year six and beyond, what is the payback period? Round to the nearest whole year.
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