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Net Present Value Analysis Hermson Company must evaluate two capital expenditure proposals. Hermsons cutoff rate is 12%. Data for the two proposals follow. Proposal X

Net Present Value Analysis Hermson Company must evaluate two capital expenditure proposals. Hermsons cutoff rate is 12%. Data for the two proposals follow.

Proposal X Proposal Y
Required investment $140,000 $140,000
Annual after-tax cash inflows 33,000
After-tax cash inflows at the end of years 3, 6, 9, and 12 99,000
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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