Assume a $300,000 Investment and the following cash flows for two products: Year Product X Product Y 1 2 3 4 $ 90,000 100,000 20,000 50,000 $ 100,000 100,000 90,000 50,000 a. Calculate the payback for products X and Y. Note: Do not round Intermediate calculations. Round your answers to 2 decimal places. Answer is complete but not entirely correct. Product X 0.00 Product Y 3.20 years years b. Which alternative would you select under the payback method? Product Y is selected O Product X is selected

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.