Selecting alternatives under the payback method


Problem: Assume a $40,000 investment and the following cash flows for two alternatives.

Year Investment X Investment Y
1 $6,000 $15,000
2 $8,000 $20,000
3 $9,000 $10,000
4 $17,000 -
5 $20,000 -

Which of the alternatives would you select under the payback method?

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Finance Basics: Selecting alternatives under the payback method
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