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Business, 15.07.2020 22:01 melanie1759

Long-term investment decision, payback method Personal Finance Problem Bill Williams has the opportunity to invest in project A that costs $ 8 comma 800 today and promises to pay $ 2 comma 200, $ 2 comma 500, $ 2 comma 500, $ 1 comma 900 and $ 1 comma 900 over the next 5 years. Or, Bill can invest $ 8 comma 800 in project B that promises to pay $ 1 comma 600, $ 1 comma 600, $ 1 comma 600, $ 3 comma 600 and $ 4 comma 000 over the next 5 years. (Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.) a. How long will it take for Bill to recoup his initial investment in project A? b. How long will it take for Bill to recoup his initial investment in project B? c. Using the payback period, which project should Bill choose? d. Do you see any problems with his choice?

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