Cash PaybackAnderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal XProposal YRequired investment$540,000$540,000Annual after-tax cash inflows54,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 136,000Life of project12 years12 yearsWhat is the cash payback period for Proposal X? For Proposal Y?Hint: For Proposal Y, in what year (3, 6, 9 or 12) will the full original investment be recovered?Round Proposal X answer to one decimal place, if applicable.Proposal XAnswer years Proposal YAnswer years

Payback period refers to the time period that is required to recover the initial cost. With the help…

Answered: Cash Payback Anderson Company must…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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Cash Payback
Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow.

	Proposal X	Proposal Y
Required investment	$540,000	$540,000
Annual after-tax cash inflows	54,000
After-tax cash inflows at the end of years 3, 6, 9, and 12		136,000
Life of project	12 years	12 years

What is the cash payback period for Proposal X? For Proposal Y?

Hint: For Proposal Y, in what year (3, 6, 9 or 12) will the full original investment be recovered?

Round Proposal X answer to one decimal place, if applicable.

Proposal X

Answer

years

Proposal Y

Answer

years

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