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Question(s) / Instruction(s):

 Simms Manufacturing is considering two alternative investment proposals with the following data

                                                                           Proposal X                Proposal Y

Investment                                                            $620,000              $400,000

Useful life                                                                8 years                8 years

Estimated annual net cash inflows for 8 years         $130,000              $80,000

Residual value                                                          $60,000                   $0

Depreciation method                                             Straight-line       Straight-line

Required rate of return                                               14%                  10%

How long is the payback period for Proposal X?

A             4.50 years

B             4.77 years

C             8 years

D             10.33 years

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