1) Newman Automobiles Manufacturing is considering two alternative investment proposals with the following data: Proposal XProposal YInvestment$12,000,000$600,000Useful life8 years8 yearsEstimated annual net cash inflows for 8 years$2,000,000$95,000Residual value$60,000$30,000Depreciation methodStraight-lineStraight-lineRequired rate of return12%10% Calculate Pay back period for Proposal X and Proposal Y.

Payback Period = Initial Investment / Annual cashflow

Answered: Newman Automobiles Manufacturing is…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 5E: Cash payback period for a service company Janes Clothing Inc. is evaluating two capital investment...

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1) Newman Automobiles Manufacturing is considering two alternative investment proposals with the following data:

	Proposal X	Proposal Y
Investment	$12,000,000	$600,000
Useful life	8 years	8 years
Estimated annual net cash inflows for 8 years	$2,000,000	$95,000
Residual value	$60,000	$30,000
Depreciation method	Straight-line	Straight-line
Required rate of return	12%	10%

Calculate Pay back period for Proposal X and Proposal Y.

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