For each proposal compute the payback peroid return on

Reference no: EM13481938

A firm is considering two alternative proposals for modernizingits production facilities. To provide a basis for selection, thecost accounting department has developed the following dataregarding the expected operating results for the two proposals:

proposal 1 proposal 2

required investment inequipment.......................................... $ 360,000 $350,000

estimated service life ofequipment....................................... 8 years 7years

estimated salvagevalue...................................................... $ 0 $14,000

estimated annual cost savings (net cashflow)...................... 75,000 76,000

depreciation on equipment ( straight-linebasis)..................... 45,000 48,000

estimated increase in annual netincome............................. 30,000 28,000

a. For each proposal, compute the: payback peroid, return on average investment and net present value, discounted at an annualrate of 12%.

Reference no: EM13481938

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