Latimer Corporation Is Considering Two Alternative Investment Proposals with the Following

question 11

Multiple Choice

Latimer Corporation is considering two alternative investment proposals with the following data: $\begin{array}{|l|r|r|}\hline & \text { Proposal X } & \text { Proposal Y } \\\hline \text { Investment } & \$ 812,500 & \$ 390,000 \\\hline \text { Useful life } & 8 \text { years } & 8 \text { years } \\\hline \begin{array}{l}\text { Estimated annual net } \\\text { cash inflows for 8 years }\end{array} & \$ 125,000 & \$ 78,000 \\\hline \text { Residual value } & \$ 40,000 & \$ \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Required rate of return } & 14 \% & 10 \% \\\hline\end{array}$

- How long is the payback period for Proposal X?

• A)5.00 years
• B)6.50 years
• C)10.42 years
• D)20.31 years

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Definitions:

Written Ideas

Ideas or concepts that have been documented in writing, facilitating communication, analysis, and further development.

Incremental Innovation

The process of making small improvements or upgrades to existing products, services, or processes, rather than creating something completely new.

Radical Innovation

Innovation that fundamentally changes existing practices, products, or technologies, often creating new markets.

Creative Synthesis

The process of combining or integrating different ideas, concepts, or elements into a novel or cohesive whole.