Question 31

Nova Manufacturing is considering two alternative investment proposals with the following data:

Proposal X Proposal Y

Investment $10,700,000 $580,000

Useful Life 5 years 5 years

Estimated annual net cash inflows for 5 years $2,140,000 $103,000

Residual Value $50,000 $26,000

Depreciation Method Straight-line Straight-line

Required rate of return 12% 13%

Calculate the payback period for Proposal X

	A.	5 years
	B.	9 years
	C.	4 years
	D.	8 years