Proposal X Proposal Y $10,700,000 $580,000 Investment Useful life Estimated annual net cash inflows for 5 years Residual value Depreciation method Required rate of return Calculate the payback period for Proposal X. 5 years 5 years $2,140,000 $103,000 $50,000 $26,000 Straight-line Straight-line 13% 12% 9 years 8 years O 5 years O 4 years
Expert Answer
C. 5 years
Payback Period = Initial Investment / Net annual Cash inflow = $10,700,000 / $2,140,000 = 5 years