Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data...

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Cash Payback Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data...

Cash Payback
Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow.

	Proposal X	Proposal Y
Required investment	$300,000	$300,000
Annual after-tax cash inflows	30,000
After-tax cash inflows at the end of years 3, 6, 9, and 12		75,000
Life of project	12 years	12 years

What is the cash payback period for Proposal X? For Proposal Y?

Hint: For Proposal Y, in what year (3, 6, 9 or 12) will the full original investment be recovered?

Round Proposal X answer to one decimal place, if applicable.

Proposal X

Answer years

Proposal Y

Answer years

business accounting

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Answer 1

Answer #1

Payback Period = investment / Annula Cash inflows

Project X= 300,000 /30,000 = 10 Years

Project Y= 300000/75000 =4 Cash flows = 3,6, 9and 12 = 12Years

Answers :

Project X= 10 Years

Project Y = 12 Years

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Answer 2

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