Question

​O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of​ $1,890,000. Under the other​ proposal, the company would focus on Kentucky and open 6 stores at a cost of​ $2,900,000 .The following information is​ available: Indiana proposal Kentucky proposal Required investment ​$1,890,000 ​$2,900,000 Estimated life 5 years 5 years Estimated residual value ​$80,000 ​$70,000 Estimated annual cash inflows over the next 9 years ​$700,000 ​$800,000 Required rate of return ​13% ​13% The payback period for the Kentucky proposal is closest to

Answer 1

Answer:

3.63yrs

Explanation:

CExplanation: C) Investment / Annual cash flows$2,900,000 / 800,000 = 3.63 yrs