Finch Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $17,250,000; it will enable the company to increase its annual cash inflow by $6,900,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $38,000,000; it will enable the company to increase annual cash flow by $9,500,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Finch should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) a-1. Alternative 1 (First plane) Alternative 2 (Second plane) a-2. Finch should accept Payback Period years years

Finch Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $17,250,000; it will enable the company to increase its annual cash inflow by $6,900,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $38,000,000; it will enable the company to increase annual cash flow by $9,500,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Finch should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) a-1. Alternative 1 (First plane) Alternative 2 (Second plane) a-2. Finch should accept Payback Period years years

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...

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