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Ross Company is considering three alternative investment proposals. Using the following information, rank the proposals in order of desirability using the payback period method. Proposal
Ross Company is considering three alternative investment proposals. Using the following information, rank the proposals in order of desirability using the payback period method.
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| Proposal |
|
| A | B | C |
Initial outlay | $ 360,000 | $ 360,000 | $ 360,000 |
Net cash inflow (after taxes): | |||
First year | $ -0- | $ 90,000 | $ 90,000 |
Second year | 180,000 | 270,000 | 180,000 |
Third year | 180,000 | 90,000 | 270,000 |
Fourth year | 90,000 | 180,000 | 450,000 |
$ 450,000 | $ 630,000 | $ 990,000
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