Question: 1. Why is the present value of $100 that you expect to receive one year from today worth less than $100 received today? What is the present value of $100 that you expect to receive one year from today, discounted at 12%?
2. Ting Company is considering two alternative investments. The payback period is 3.5 years for investment A and 5 years for investment B.
(1) If management relies on the payback period, which investment is preferred?
(2) Why might Ting's analysis of these two alternatives lead to the selection of B over A?