Exercise $10-12$A $($Algo$)$ Determining the payback period LO $10-4$

Fanning Alrline 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 $$14,800,000$; It will enable the company to Increase its annual cash inflow by

$$3,700,000$ per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs

$$34,800,000$; It will enable the company to Increase annual cash flow by $$5,800,000$ per year. This plane has an elght$-$year useful life

and a zero salvage value.

Required

a$1.$ Determine the payback perlod for each Investment alternatlve.

a$2.$ Identify the alternative Fanning should accept If the decision is based on the payback approach.

Note: Round your answers to $1$ decimal place.