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Determine the payback period for each investment

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Question - Franklin Airline 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 $12,420,000; it will enable the company to increase its annual cash inflow by $5,400,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $41,860,000; it will enable the company to increase annual cash flow by $9,100,000 per year. This plane has an eight-year useful life and a zero salvage value.

Required - Determine the payback period for each investment alternative and identify the alternative Franklin should accept if the decision is Aint based on the payback approach.

Reference no: EM133173195

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