FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
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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.
Option A,
Option B,
Product A Product B
$190,000
$145,000
195,000
185,000
60,000
55,000
15,000
75,000
A. Calculate the payback period of each product. Round your answers to 2 decimal places.
Option A, Product A
3.33
years
Option B, Product B
years
B. Which of the two options would you choose based on the payback method?
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