Cash Payback

Hermson Company must evaluate two capital expenditure proposals. Hermson's hurdle rate is $12\%.$ Data for the two proposals follow.

Proposal X Proposal Y

Required investment $$910,000$ $$910,000$

Annual after$-$tax cash inflows $123,750$

After$-$tax cash inflows at the end of years $3,6,9,$ and $12306,000$

Life of project $12$ years $12$ years

What is the cash payback period for Proposal X$?$ For Proposal Y$?$

Hint: For Proposal Y$,$ in what year $(3,6,9$ or $12)$ will the full original investment be recovered?

Round Proposal X answer to one decimal place, if applicable.

Proposal X

Answer

years

Proposal Y

Answer

years