The Midland Company is attempting to choose between two new products. Both products will provide additional cash flows over a four-year period and will initially cost $10,000. The cash flows from the products are as follows:

At first, it appears that Product A would be best. However, the cash flows from Product B come earlier than those of A. Without more information, we cannot decide which set of cash flows would create the most value for the bondholders and shareholders. It depends on whether the value of getting cash from B up front outweighs the extra total cash from A.

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Year 123 4 Total New Product A New Product B $ $ 4,000 4,000 0 0 20,000 $20,000 4,000 4,000 $16,000