Stenback, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: Initial capital investment Estimated useful life Estimated residual value $ Investment A Investment B 320,000 $ 13 years 5,000 90,000 11% 240,000 6 years 12,000 85,000 11% Estimated annual net cash inflow for 10 years Required rate of return Compute the payback period for each investment. Show your calculations and round to one decimal place.
Stenback, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: Initial capital investment Estimated useful life Estimated residual value $ Investment A Investment B 320,000 $ 13 years 5,000 90,000 11% 240,000 6 years 12,000 85,000 11% Estimated annual net cash inflow for 10 years Required rate of return Compute the payback period for each investment. Show your calculations and round to one decimal place.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Stenback, Inc. 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
320,000 $
240,000
13 years
6 years
5,000
12,000
Estimated annual net cash inflow for 10 years
90,000
85,000
Required rate of return
11%
11%
Compute the payback period for each investment. Show your calculations and round to one decimal place.
Initial capital investment
Estimated useful life
Estimated residual value
$
Investment A
Investment B
CIL
Select the formula, then enter the amounts to calculate the payback period for each investment.
Payback (in years)
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