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Bailey 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 $24,570,000; it will enable the company to increase its annual cash inflow by $6,300,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $36,520,000; it will enable the company to increase annual cash flow by $8,300,000 per year. This plane has an eight-year useful life and a zero salvage value.
Required:
a-1. Determine the payback period for each investment alternative. (Round your answers to 1 decimal place.)
PAYBACK PERIOD
ALTERNATIVE 1 ??? years
ALTERNATIVE 2 ??? years
a-2. Identify the alternative Bailey should accept if the decision is based on the payback approach.

Sagot :

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