Use the payback method to determine whether White should purchase this plant. Round to one decimal place.

 

Exercise #1

 

Using payback to make capital investment decisions

 

White Co. is considering acquiring a manufacturing plant. The purchase price is $1,350,000. The owners believe the plant will generate net cash inflows of $329,000 annually. It will have to be replaced in six years.

 

Instructions

 

Use the payback method to determine whether White should purchase this plant. Round to one decimal place.

 

Exercise #2

 

Using IRR to make capital investment decisions

 

Refer to following data regarding Juda Products.

 

 

Instructions

 

Compute the IRR of each project and use this information to identify the better investment

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