Exercise 10-12A (Algo) Determining the payback period LO 10-4 Solomon 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 $12,420,000; it will enable the company to increase its annual cash inflow by $5,400,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $25,600,000; it will enable the company to increase annual cash flow by $8,000,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Solomon should accept if the decision is based on the payback approach, (Round your answers to 1 decimal place.) a-1. Alternative 1 (First plane) Alternative 2 (Second plane) a-2. Solomon should accept Payback Period years years Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4 Thornton Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Thornton , would sell it at the end of the fifth year of its useful life. The expected cash inflows and outiows follow Year Nature of Item Cash Inflow Cash Outflow Year 1 Purchase price $93,400 $38,000 Revenue 38,000 Year 3 Revenge 27,000 Major overhaul 24,000 Year 1 Year 2 Revenue 9.600 Year 3 Year 4 Year 5 Year 5 Revenue Revenue Salvage value 22,000 8,400 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches, (Round your answers to 1 decimal place.) Payback period (accumulated cash flows) b. Payback period (average cash flows) years years