Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 18EA: Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and...
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The Short-Line Railroad is considering a $140,000 investment in either of two companies. The cash flows are as follows:
| Year | Electric Co. | Water Works | ||||
| 1 | $ | 85,000 | $ | 30,000 | ||
| 2 | 25,000 | 25,000 | ||||
| 3 | 30,000 | 85,000 | ||||
| 4–10 | 10,000 | 10,000 | ||||
a. Compute the payback period for both companies.
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