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Cash Payback Hermson Company must evaluate two capital expenditure proposals

Accounting

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

  Proposal X Proposal Y
Required investment $1,050,000 $1,050,000
Annual after-tax cash inflows 107,250  
After-tax cash inflows at the end of years 3, 6, 9, and 12   264,000
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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