Author Question: Williams Department Stores is considering two possible expansion plans. One proposal involves ... (Read 113 times)

maegan_martin

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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 proposalKentucky proposal
Required investment$1,800,000$2,400,000
Estimated life10 years10 years
Estimated residual value$50,000$80,000
Estimated annual cash inflows over the
next 10 years
$400,000$500,000
Required rate of return10%10%


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



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renzo156

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  • Posts: 526
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 proposalKentucky proposal
Required investment$1,800,000$2,400,000
Estimated life10 years10 years
Estimated residual value$50,000$80,000
Estimated annual cash inflows over the
next 10 years
$400,000$500,000
Required rate of return10%10%


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




 

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