The Short-Line Railroad is considering a $100,000 investment in either of two companies. The cash flows are

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The Short-Line Railroad is considering a $100,000 investment in either of two companies. The cash flows are as follows:

Electric Co. Year Water Works $70,000 $15,000 1 15,000 15,000 15,000 3 70,000 10,000 10,000 4-10

a. Using the payback method, what decision should be made?
b. Explain why the answer in part a can be misleading.

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Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Question Posted: Sep 15, 2018 11:39 AM

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The Short-Line Railroad is considering a $100,000 investment in either of two companies. The cash flows are

Question:

Electric Co. Year Water Works $70,000 $15,000 1 15,000 15,000 15,000 3 70,000 10,000 10,000 4-10

Step by Step Answer:

a Payback for Electric Co Payback for Water Works 100000 70000 1 year 100000 15000 1 yea...View the full answer

Foundations of Financial Management

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