Long-term investment decision, payback method Personal Finance Problem Bill Williams has the opportunity to invest in project A that costs $6,400 today and promises to pay $2,100, $2,600, $2,600, $2,000 $1,800 over the next 5 years. Or, Bill can invest $6,400 in project B that promises to pay $1,600, $1,600, $1,600, $3,600 $3,900 over the next 5 years. (Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.) a. How long will it take for Bill to recoup his initial investment in project A? b. How long will it take for Bill to recoup his initial investment in project B?
Long-term investment decision, payback method Personal Finance Problem Bill Williams has the opportunity to invest in project A that costs $6,400 today and promises to pay $2,100, $2,600, $2,600, $2,000 $1,800 over the next 5 years. Or, Bill can invest $6,400 in project B that promises to pay $1,600, $1,600, $1,600, $3,600 $3,900 over the next 5 years. (Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.) a. How long will it take for Bill to recoup his initial investment in project A? b. How long will it take for Bill to recoup his initial investment in project B?
Chapter13: Investment Fundamentals
Section: Chapter Questions
Problem 1DTM
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Long-term investment decision, payback method
Bill Williams has the opportunity to invest in project A that costs
$6,400 today
and promises to pay
$2,100,
$2,600,
$2,600,
$2,000
$1,800
over the next 5 years.
Or, Bill can invest
$6,400 in project B that
promises to pay
$1,600,
$1,600,
$1,600,
$3,600
$3,900
over the next 5 years.
(Hint:
For mixed stream
recovered.)
a. How long will it take for Bill to recoup his initial investment in project A?
b. How long will it take for Bill to recoup his initial investment in project B?
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