Exercise 16-12A (Algo) Determining the payback period LO 16-4 Zachary 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 $13,110,000, it will enable the company to increase its annual cash inflow by $5,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $37,840,000; it will enable the company to increase annual cash flow by $8,600,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Zachary should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) a-1 Alternative 1 (First plane) Alternative 2 (Second plane) a2 Zachary should accept Payback Period years years
Exercise 16-12A (Algo) Determining the payback period LO 16-4 Zachary 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 $13,110,000, it will enable the company to increase its annual cash inflow by $5,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $37,840,000; it will enable the company to increase annual cash flow by $8,600,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Zachary should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) a-1 Alternative 1 (First plane) Alternative 2 (Second plane) a2 Zachary 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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Transcribed Image Text:Exercise 16-12A (Algo) Determining the payback period LO 16-4
Zachary 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 $13,110,000, it will enable the company to increase its annual cash inflow by
$5,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs
$37,840,000. it will enable the company to increase annual cash flow by $8,600,000 per year. This plane has an eight-year useful life
and a zero salvage value.
Required
a. Determine the payback period for each investment alternative and identify the alternative Zachary should accept if the decision is
based on the payback approach. (Round your answers to 1 decimal place.)
a-1 Alternative 1 (First plane)
Alternative 2 (Second plane)
a2 Zachary should accept
Payback Period
years
years
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