Exercise 10-12A (Algo) Determining the payback period LO 10-4 Rundle Airline Company is considering expanding...
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Exercise 10-12A (Algo) Determining the payback period LO 10-4 Rundle 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 $15,750,000; it will enable the company to increase its annual cash inflow by $6,300,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $36,540,000; it will enable the company to increase annual cash flow by $8,700,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a1. Determine the payback period for each investment alternative. a2. Identify the alternative Rundle should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place
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Exercise 10-12A (Algo) Determining the payback period LO 10-4 Rundle 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 $15,750,000; it will enable the company to increase its annual cash inflow by $6,300,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $36,540,000; it will enable the company to increase annual cash flow by $8,700,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a1. Determine the payback period for each investment alternative. a2. Identify the alternative Rundle should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place 