Test:Exam 4/Final Exam Time Remaining: 013922 Su This Question: 1 pt 12 of 35 (4

Question

Test:Exam 4/Final Exam Time Remaining: 013922 Su This Question: 1 pt 12 of 35 (4 complete) This Test: 35 pts Redwood Corporation is considering two alternative investment proposals with the following data: Investment Useful life Proposal X $830,000 8 years Proposal Y $486,000 8 years Estimated annual net cash inflows for 8 years 130,000 $39,000 Straight- line $78,000 Residual value Straight- line 19% Required rate of returr How long is the payback period for Proposal Y? O A. O B. 6 38 years 12.46 years Oc. 21.28 years O D. 6.23 years e to

Explanation / Answer

Solution:

Option D is correct,

Payback period = Investment / Expected annual net cash inflow

Payback period = $486,000.00 / $78,000.00

Payback period = 6.23 years

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