Assume a company is going to make an investment of $460,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Option A, Product A Option B, Product B $195,000 $145,000 185,000 175,000 65,000 65,000 25,000 85,000 A. Calculate the payback period of each product. Round your answers to 2 decimal places. Option A, Product A fill in the blank 1 years Option B, Product B fill in the blank 2 years B. Which of the two options would you choose based on the payback method?
Assume a company is going to make an investment of $460,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Option A, Product A Option B, Product B $195,000 $145,000 185,000 175,000 65,000 65,000 25,000 85,000 A. Calculate the payback period of each product. Round your answers to 2 decimal places. Option A, Product A fill in the blank 1 years Option B, Product B fill in the blank 2 years B. Which of the two options would you choose based on the payback method?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 4EA: Assume a company is going to make an investment of $450,000 in a machine and the following are the...
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Assume a company is going to make an investment of $460,000 in a machine and the following are the cash flows that two different products would bring in years one through four.
| Option A, Product A | Option B, Product B |
| $195,000 | $145,000 |
| 185,000 | 175,000 |
| 65,000 | 65,000 |
| 25,000 | 85,000 |
A. Calculate the payback period of each product. Round your answers to 2 decimal places.
| Option A, Product A | fill in the blank 1 years |
| Option B, Product B | fill in the blank 2 years |
B. Which of the two options would you choose based on the payback method?
Transcribed Image Text:Assume a company is going to make an investment of $460,000 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
$195,000
$145,000
185,000
175,000
65,000
65,000
25,000
85,000
A. Calculate the payback period of each product. Round your answers to 2 decimal places.
Option A, Product A
years
Option B, Product B
years
B. Which of the two options would you choose based on the payback method?
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