The Dammon Corp. has the following investment opportunities: $\begin{array}{lccc}
\text { Machine A }&\text { Machine B }&\text { Machine C }\
\text { (\$ 10.000) }&\text {(\$ 22.500)}&\text { (\$ 35.500) }\
\text { Inflows }&\text { Inflows }&\text { Inflows }\

\text { year 1 }\quad \$ 6,000 &\text { year } 1 \quad \$ 12,000 &\text { year 1 } \quad-0-\
\text { year 2 }\quad 3,000& \text { year } 2 \quad7,500 &\text { year 2 }\quad 30,000\
\text { year } 3 \quad 3,000 & \text { year } 3 \quad 1,500& \text { year 3 }\quad 5,000\
\text { year } 4 \quad-0- &\text { year } 4\quad 1,500&\text { year 4 }\quad 20,000
\end{array}$ Under the payback method and assuming these machines are mutually exclusive, which machine(s) would Dammon Corp. choose?

Question

The Dammon Corp. has the following investment opportunities: $\begin{array}{lccc}
\text { Machine A }&\text { Machine B }&\text { Machine C }\
\text { (\$ 10.000) }&\text {(\$ 22.500)}&\text { (\$ 35.500) }\
\text { Inflows }&\text { Inflows }&\text { Inflows }\

\text { year 1 }\quad \$ 6,000 &\text { year } 1 \quad \$ 12,000 &\text { year 1 } \quad-0-\
\text { year 2 }\quad  3,000& \text { year } 2 \quad7,500 &\text { year 2 }\quad 30,000\
\text { year } 3 \quad 3,000 & \text { year } 3 \quad 1,500& \text { year 3 }\quad 5,000\
\text { year } 4 \quad-0- &\text { year } 4\quad 1,500&\text { year 4 }\quad 20,000
\end{array}$ Under the payback method and assuming these machines are mutually exclusive, which machine(s) would Dammon Corp. choose?

Quizplus · Accepted Answer

Machine A has a payback period of 2 years, which is the shortest among the options. Machine B has a payback period of 3 years, and Machine C has a payback period of 3 years as well. Therefore, Machine A is the preferred choice under the payback method.

The Dammon Corp Under the Payback Method and Assuming These Machines Are Mutually