Question

Whispering WindsCompany is considering two capital investment proposals. Estimates regarding each project are provided below:

	Project Soup	Project Nuts
Initial investment	$430000	$588000
Annual net income	30000	46000
Net annual cash inflow	110000	146000
Estimated useful life	5 years	6 years
Salvage value	0	0

The company requires a 10% rate of return on all new investments.

	Present Value of an Annuity of 1
Periods	9%	10%	11%	12%
5	3.89	3.791	3.696	3.605
6	4.486	4.355	4.231	4.111

The cash payback period for Project Nuts is

14.33 years.

6.39 years.

5.38 years.

4.03 years.

Answer 1

Points from Given Information Particulars Initial Investment Annual Net Cash Inflow Estimated Useful Life Salvage Value Project Soup Project Nuts 430,000 588,000 110,000 146,000 5 6 Determination of Cash Payback Period: Cash Payback Period : Initial Investment 3.91 Annual Net Cash Inflow 4.03 Therefore, the Answer is Option - D[4.03 Years]