Redtail Hawk Company is evaluating two possible investments in depreciable plant assets. The company uses the straight−line method of depreciation. The following information is available: Investment A Investment B Initial capital investment $17,500 $455,000 Estimated useful life 8 years 8 years Estimated residual value $8,000 $15,000 Estimated annual net cash inflow $7,000 $70,000 Required rate of return 11% 12% How long is the payback period for Investment A?
Redtail Hawk Company is evaluating two possible investments in depreciable plant assets. The company uses the straight−line method of depreciation. The following information is available: Investment A Investment B Initial capital investment $17,500 $455,000 Estimated useful life 8 years 8 years Estimated residual value $8,000 $15,000 Estimated annual net cash inflow $7,000 $70,000 Required rate of return 11% 12% How long is the payback period for Investment A?
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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Question
Redtail Hawk Company is evaluating two possible investments in depreciable plant assets. The company uses the
straight−line
method of depreciation. The following information is available:
|
Investment A
|
Investment B
|
Initial capital investment
|
$17,500
|
$455,000
|
Estimated useful life
|
8 years
|
8 years
|
Estimated residual value
|
$8,000
|
$15,000
|
Estimated annual net
|
$7,000
|
$70,000
|
Required
|
11%
|
12%
|
How long is the payback period for Investment A?
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