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Compute both the payback period

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Question - Sunshine Printing Ltd. is in need of a 3D printer. It has received two proposals, with related facts as follows:

 

Proposal A

Proposal B

Cost of printer

$90,000

$90,000

Annual cash flows in operations:

 

 

Year 1

80,000

90,000

Year 2

10,000

0

Year 3

45,000

0

Estimated life

3 years

1 year

The company uses straight-line depreciation for all capital assets. Compute both the payback period, and the accounting rate of return for each proposal. Use a required rate of return of 12%.

Reference no: EM132732213

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