Williams Department Stores is considering two possible expansion ...

[maegan_martin]

Williams Department Stores is considering two possible expansion plans.  One proposal involves opening 5 stores in Indiana at the cost of $1,800,000.  Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,400,000.  The following information is available:

​	Indiana proposal	Kentucky proposal
Required investment	$1,800,000	$2,400,000
Estimated life	10 years	10 years
Estimated residual value	$50,000	$80,000
Estimated annual cash inflows over the next 10 years	$400,000	$500,000
Required rate of return	10%	10%

The payback period for the Kentucky proposal is closest to
◦ 4.8 years.
◦ 7.0 years.
◦ 4.5 years.
◦ 6.0 years.

[tsternbergh47]

4.8 years.

[renzo156]

Williams Department Stores is considering two possible expansion plans.  One proposal involves opening 5 stores in Indiana at the cost of $1,800,000.  Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,400,000.  The following information is available:

​	Indiana proposal	Kentucky proposal
Required investment	$1,800,000	$2,400,000
Estimated life	10 years	10 years
Estimated residual value	$50,000	$80,000
Estimated annual cash inflows over the next 10 years	$400,000	$500,000
Required rate of return	10%	10%

The payback period for the Indiana proposal is closest to
◦ 4.8 years.
◦ 3.6 years.
◦ 4.5 years.
◦ 36.0 years.

[Mholman93]

4.5 years.