Nubela manufacturing is considering two alternative investment proposals with the following data:
proposal x proposal y
investment $10,700,000 $580,000
useful life 5 years 5 years
estimated annual
net cash inflows
for 5 years $2,140,000 $103,000
residual value $50,000 $26,000
depreciation method straight-line straight-line
required rate of return 12% 13%
calculate the payback period for proposal x.
a) 9years b) 4 years c) 8 years d)5 years

5 years

Explanation:

Given:

For proposal X

The initial Investment = $10,700,000

Useful life =  5 years

Estimated annual net cash inflows for 5 years = $2,140,000

Residual value = $50,000

since,

the depreciation method is a straight line

thus,

payback period for the proposal X will be given as:

Payback period = (Initial investment) / (Estimated annual cash inflows)

on substituting the values, we get

Payback period = $10,700,000 / $2,140,000

or

Payback period for the proposal X = 5 years

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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