Question

10 - You were given two investment options, A and B. Calculate the payback period for both. Based only on the payback period, which option is the most advantageous? Year A B 0 -15,000 -20,000 1 6,000 5,000 2 6,000 5,000 3 6,000 8,000 4 6,000 11,000 5 6,000 14,000 Answer: Payback for A is 2.5 years and for B is 3.2 years, thus A is better.

          10 - You were given two investment options, A and B. Calculate the payback period for both. Based only
on the payback period, which option is the most advantageous?
Year
A
B
0
-15,000 -20,000
1
6,000 5,000
2
6,000
5,000
3
6,000
8,000
4
6,000 11,000
5
6,000 14,000
Answer: Payback for A is 2.5 years and for B is 3.2 years, thus A is better.

10 - You were given two investment options, A and B. Calculate the payback period for both. Based only
on the payback period, which option is the most advantageous?
Year
A
B
0
-15,000 -20,000
1
6,000 5,000
2
6,000
5,000
3
6,000
8,000
4
6,000 11,000
5
6,000 14,000
Answer: Payback for A is 2.5 years and for B is 3.2 years, thus A is better.

Added by Tyler E.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Carson Merrill

11/21/2021

Step 1

To calculate the cumulative cash flow, we need to add up the cash flows for each year. For option A: Year 0: -15,000 Year 1: 6,000 Year 2: 6,000 Year 3: 6,000 Year 4: 6,000 Year 5: 6,000 Cumulative cash flow for option A: Year 0: -15,000 Year 1: -15,000 + 6,000 Show more…

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10 - You were given two investment options, A and B. Calculate the payback period for both. Based only on the payback period, which option is the most advantageous? Year A B 0 -15,000 -20,000 1 6,000 5,000 2 6,000 5,000 3 6,000 8,000 4 6,000 11,000 5 6,000 14,000 Answer:Payback for A is 2.5 years and for B is 3.2 years,thus A is better