Which alternative would you select under the payback method

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Assume a $250,000 investment

Assume a $250,000 investment and the cash flows for the two products listed 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?

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.
Solutions:
a. Calculate the payback for products X and Y. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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
b. Which alternative would you select under the payback method?
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