CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 3 Not complete Points out of 2

Question

CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 3 Not complete Points out of 2.00 Net Present Value Analysis P Flag question Herrnson Company must evaluate two capital expenditure proposals. Herrnson's cutoff rate is 12%. Data for the two proposals follow. Proposal X ProposalY Required i Annual after-tax cash inflows After-tax cash inflows at the end of years 3,6, 9, and 12 Life of project $140,000 $140,000 33,000 12 years 12 years What is the cash payback period for Proposal X? For Proposal Y? Hint: For Proposal Y, in wh Round Proposal X answer to one decimal place, if applicable. Proposal X Hint: For Proposal Y. in what year (3,6.9r 12 vill h figinal investment be recovered? years Proposal Y years Check

Explanation / Answer

Calculate cash payback period :

Payback period = Initial investment/annual cash flow

Proposal X = 140000/33000 = 4.2 years

Proposal Y :

99000 in one year, 99000+99000 = 198000 is cumulative in 6 years

So proposal Y cash payback period is 6 years

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---