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 a1. 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 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 a1. 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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff661ed81-e88f-4903-8813-5b2671016656%2Fe048b3f2-dde2-464b-b8ad-8e70576b2a1f%2Ffqbxssq_processed.png&w=3840&q=75)
Transcribed Image Text: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
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