Exercise 10-12A (Algo) Determining the payback period LO 10-4 Campbell Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $19,720,000; it will enable the company to increase its annual cash inflow by $6,800,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $40,020,000; it will enable the company to increase annual cash flow by $8,700,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a1. Determine the payback period for each investment alternative. a2. Identify the alternative Campbell should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alterative 2 (Second plane) a-2. Campbell should accept Payback Period 2.0 years years alternative 1

Exercise 10-12A (Algo) Determining the payback period LO 10-4 Campbell Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $19,720,000; it will enable the company to increase its annual cash inflow by $6,800,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $40,020,000; it will enable the company to increase annual cash flow by $8,700,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a1. Determine the payback period for each investment alternative. a2. Identify the alternative Campbell should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alterative 2 (Second plane) a-2. Campbell should accept Payback Period 2.0 years years alternative 1

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually...

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Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4 Baird Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Baird would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Year 3. Year 3. Year 4 Year 5 Year 5 Nature of Item Purchase price. Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value Cash Inflow $31, 000 31, 000 26,000 17,000 15,000 7,000 Cash Outflow $79, 800 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 8, 200 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years
Exercise 10-12A (Algo) Determining the payback period LO 10-4 Fanning Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $14,800,000; It will enable the company to Increase its annual cash Inflow by $3,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $34,800,000; It will enable the company to increase annual cash flow by $5,800,000 per year. This plane has an eight-year useful life and a zero salvage value. Required *1. Determine the payback period for each Investment alternative. a2. Identify the alternative Fanning should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alternative 2 (Second plane) a-2. Fanning should accept Payback Period years years
Exercise 16-12A (Algo) Determining the payback period LO 16-4 Baird Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $13,020,000, it will enable the company to increase its annual cash inflow by $6.200,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $40,040,000, it will enable the company to increase annual cash flow by $9.100,000 per year. This plane has an eight-year useful life and a zero salvage value. Required o. Determine the payback period for each investment alternative and identify the alternative Baird should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) Payback Period a-1. Alternative 1 (First plane) years Altenative 2 (Second plane) years a-2. Baird should accept
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ts 19 Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $100,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project? O $12.155 O $3,875 O-$9,783 O $19,016 $9.555