Assume a $6,500 investment and the following cash flows for two alternatives.
$\begin{array}{llll}\text { Year } & \text { Investment X }& \text { Investment Y }\
1 & \$ 1,000 & \$ 1,300 \
2 & 1,800 & 2,000 \
3 & 1,700& 1,100 \
4 & 2,000 & 1,500 \
5 & & 600
\end{array}$
Under the payback method, which of the following could be concluded?

Question

Assume a $6,500 investment and the following cash flows for two alternatives.
$\begin{array}{llll}\text { Year } & \text { Investment X }& \text { Investment Y }\
1 & \$ 1,000 & \$  1,300 \
2 & 1,800 &  2,000 \
3 & 1,700&  1,100 \
4 & 2,000 &  1,500 \
5 & & 600
\end{array}$
Under the payback method, which of the following could be concluded?

Quizplus · Accepted Answer

The payback period for Investment X is less than 4 years (sum of cash flows by Year 3 is $4,500, and by Year 4 it exceeds the initial investment of $6,500), while Investment Y takes the full 5 years to recover the initial investment, making Investment X the better choice under the payback method.

Assume a $6,500 Investment and the Following Cash Flows for Two