Solved: Cash flows for two alternatives, Finance Basics

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Cash flows for two alternatives

Problem: Assume a $4,000 investment and the following cash flows for two alternatives.

Year Investment X Investment Y

1 $1,000 $1,300
2 800 2,800
3 700 100
4 1,900
5 2,000

a. Under the payback method, which investment should be chosen?

b. Why do other methods allow for a better analysis?

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Finance Basics: Cash flows for two alternatives

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