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Griffith Vehicle has received three proposals for its new vehicle-painting machine. Information on each proposal is as follows: Proposal X Proposal Y Proposal Z Initial investment in equipment $240,000 $150,000 $190,000 Working capital needed 10,000 Annual cash saved by operations: Year 1 80,000 50,000 80,000 Yoar ? 80 000 42000 80000

Griffith Vehicle has received three proposals for its new vehicle-painting machine. Information on each proposal is as follows: Proposal X Proposal Y Proposal Z Initial investment in equipment $240,000 $150,000 $190,000 Working capital needed 10,000 Annual cash saved by operations: Year 1 80,000 50,000 80,000 Yoar ? 80 000 42000 80000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Based solely (only) on the calculated payback periods for each proposal above, which project and why, is management likely to prefer for investment?

**Griffith Vehicle: Evaluation of Proposals for New Vehicle-Painting Machine** Griffith Vehicle has received three proposals for its new vehicle-painting machine. The details for each proposal are outlined below: **Proposal X** - **Initial investment in equipment:** $240,000 - **Working capital needed:** $0 **Annual Cash Saved by Operations:** - Year 1: $80,000 - Year 2: $80,000 - Year 3: $80,000 - Year 4: $80,000 **Salvage Value at End of Year:** - Year 1: $100,000 - Year 2: $80,000 - Year 3: $40,000 - Year 4: $10,000 - **Working capital returned:** $0 --- **Proposal Y** - **Initial investment in equipment:** $150,000 - **Working capital needed:** $0 **Annual Cash Saved by Operations:** - Year 1: $50,000 - Year 2: $42,000 - Year 3: $46,000 - Year 4: $24,000 **Salvage Value at End of Year:** - Year 1: $80,000 - Year 2: $60,000 - Year 3: $40,000 - Year 4: $20,000 - **Working capital returned:** $0 --- **Proposal Z** - **Initial investment in equipment:** $190,000 - **Working capital needed:** $10,000 **Annual Cash Saved by Operations:** - Year 1: $80,000 - Year 2: $80,000 - Year 3: $80,000 - Year 4: $80,000 **Salvage Value at End of Year:** - Year 1: $60,000 - Year 2: $50,000 - Year 3: $30,000 - Year 4: $15,000 - **Working capital returned:** $10,000 The table provides a comprehensive comparison of the cash savings and salvage values over a four-year period for each proposal, assisting in the decision-making process for investment in a new vehicle-painting machine.
Transcribed Image Text:**Griffith Vehicle: Evaluation of Proposals for New Vehicle-Painting Machine** Griffith Vehicle has received three proposals for its new vehicle-painting machine. The details for each proposal are outlined below: **Proposal X** - **Initial investment in equipment:** $240,000 - **Working capital needed:** $0 **Annual Cash Saved by Operations:** - Year 1: $80,000 - Year 2: $80,000 - Year 3: $80,000 - Year 4: $80,000 **Salvage Value at End of Year:** - Year 1: $100,000 - Year 2: $80,000 - Year 3: $40,000 - Year 4: $10,000 - **Working capital returned:** $0 --- **Proposal Y** - **Initial investment in equipment:** $150,000 - **Working capital needed:** $0 **Annual Cash Saved by Operations:** - Year 1: $50,000 - Year 2: $42,000 - Year 3: $46,000 - Year 4: $24,000 **Salvage Value at End of Year:** - Year 1: $80,000 - Year 2: $60,000 - Year 3: $40,000 - Year 4: $20,000 - **Working capital returned:** $0 --- **Proposal Z** - **Initial investment in equipment:** $190,000 - **Working capital needed:** $10,000 **Annual Cash Saved by Operations:** - Year 1: $80,000 - Year 2: $80,000 - Year 3: $80,000 - Year 4: $80,000 **Salvage Value at End of Year:** - Year 1: $60,000 - Year 2: $50,000 - Year 3: $30,000 - Year 4: $15,000 - **Working capital returned:** $10,000 The table provides a comprehensive comparison of the cash savings and salvage values over a four-year period for each proposal, assisting in the decision-making process for investment in a new vehicle-painting machine.
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