Assume a $250,000 investment and the cash flows for the two products listed below. Investment amount $250,000
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Question:
Assume a $250,000 investment and the cash flows for the two products listed below.
| Investment amount | $250,000 | |||
| Cash flows: | Product X | Product Y | ||
| Year 1 | $90,000 | $50,000 | ||
| Year 2 | 90,000 | 80,000 | ||
| Year 3 | 60,000 | 60,000 | ||
| Year 4 | 20,000 | 70,000 | ||
| Enter answers in the highlighted areas below. |
a. Calculate the payback for products X and Y. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. Which alternative would you select under the payback method?
| Product X: | ||||
| Cash flows | Amount yet to be Recovered | |||
| Initial investment | ||||
| Year 1 | ||||
| Year 2 | ||||
| Year 3 | ||||
| Year 4 | ||||
| Payback period X | years | |||
| Product Y: | ||||
| Cash flows | Amount yet to be Recovered | |||
| Initial investment | ||||
| Year 1 | ||||
| Year 2 | ||||
| Year 3 | ||||
| Year 4 | ||||
| Payback period Y | years |
Expert Answer:
a The payback period is a capital budgeting technique that calculates the total time in which ... View the full answer
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