Cash Payback Hermson Company must evaluate two capital expenditure proposals. Hermson's hurdle rate is 12%. Data for the two proposals follow. Required investment Annual after-tax cash inflows After-tax cash inflows at the end of years 3, 6, 9, and 12 Life of project Proposal X Proposal Y $70,000 $70,000 33,000 Proposal X Answer years Proposal Y Answer years 12 years 72,000 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.
Cash Payback Hermson Company must evaluate two capital expenditure proposals. Hermson's hurdle rate is 12%. Data for the two proposals follow. Required investment Annual after-tax cash inflows After-tax cash inflows at the end of years 3, 6, 9, and 12 Life of project Proposal X Proposal Y $70,000 $70,000 33,000 Proposal X Answer years Proposal Y Answer years 12 years 72,000 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.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Cash Payback
Hermson Company must evaluate two capital expenditure proposals. Hermson's hurdle rate is 12%. Data
for the two proposals follow.
Required investment
Annual after-tax cash inflows
After-tax cash inflows at the end of years 3, 6, 9, and 12
Life of project
Proposal X Proposal Y
$70,000
$70,000
33,000
Proposal X
Answer years
Proposal Y
Answer years
12 years
72,000
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.
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