Sungsam Electronics has to choose between two investment options Each alternative involves an initial outlay of $100,000. Their cash flows follow: Year A $10,000 20,000 30,000 40,000 50,000 B $50,000 40,000 30,000 1 Evaluate and rank each alternative based on a) payback period b) net present value (use a 10% discount rate)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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6,
Sungsam Electronics has to choose between two investment options Each
alternative involves an initial outlay of $100,000. Their cash flows follow:
Year
A
$10,000
20,000
30,000
40,000
50,000
B
$50,000
40,000
30,000
1
3
4
Evaluate and rank each alternative based on
a) payback period
b) net present value (use a 10% discount rate)
c) internal rate of return. (Hint: Use Cash flows in Calculator for Parts b & c)
Transcribed Image Text:Sungsam Electronics has to choose between two investment options Each alternative involves an initial outlay of $100,000. Their cash flows follow: Year A $10,000 20,000 30,000 40,000 50,000 B $50,000 40,000 30,000 1 3 4 Evaluate and rank each alternative based on a) payback period b) net present value (use a 10% discount rate) c) internal rate of return. (Hint: Use Cash flows in Calculator for Parts b & c)
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