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.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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)
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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