Question: Simms Manufacturing is considering two alternative investment proposals with the following data:
|
|
Proposal X
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Proposal Y
|
|
Investment
|
$620,000
|
$400,000
|
|
Useful life
|
8 years
|
8 years
|
|
Estimated annual net
cash inflows for 8 years
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$130,000
|
$80,000
|
|
Residual value
|
$60,000
|
$0
|
|
Depreciation method
|
Straight-line
|
Straight-line
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|
Required rate of return
|
14%
|
10%
|
How long is the payback period for Proposal X?