Problem 12-9 Payback method [LO3]

The Short-Line Railroad is considering a $120,000 investment in either of two companies. The cash flows are as follows:

Year	Electric Co.			Water Works
1	$	60,000		$	30,000
2		30,000			30,000
3		30,000			60,000
4 10		20,000			20,000

a.	Compute the payback period for both companies. (Round your answers to 1 decimal place.)

	Payback Period
Electric Co.	years
Water Works	years

b.

Which of the investments is superior from the information provided?

	Water Works
	Electric Co.