1. The Short-Line Railroad is considering a $100,000 investment in either of two companies. The cash flows are as
follows: Year Electric Co. Water Works 1.........$70,000 15,000 2..........15,000 15,000 3...........15,000 70,000 4-10........10,000 10,000 (a) Using the payback method, what will the decision be? (b) Explain why the answer in part (a) can be misleading.
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