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 $540,000 $540,000 Annual after-tax cash inflows 54,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 136,000 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
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 $540,000 $540,000 Annual after-tax cash inflows 54,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 136,000 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | $540,000 | $540,000 |
| Annual after-tax |
54,000 | |
| After-tax cash inflows at the end of years 3, 6, 9, and 12 | 136,000 | |
| 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
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