Finance

Assume a $4,000 investment and the following cash flows for two alternatives.
Year Investment X Investment Y
1 $1,000 $1,300
2 800 2,800
3 700 100
4 1,900
5 2,000

a. Under the payback method, which investment should be chosen? (Show your work/analysis/calculations for each investment).

b. Why do other methods allow for a better analysis?

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  1. How much will Pauline pay in interest if she takes out a simple interest loan with a principal of $3,900 at 7.2% for three years?

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  2. Calculate the return on investment in dollars and as a percentage for an investment that you purchase for $500 and sell for $600.

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