Williams Department Stores Is Considering Two Possible Expansion Plans - the Payback Period for the Indiana Proposal Is Closest

question 25

Multiple Choice

Williams Department Stores is considering two possible expansion plans.One proposal involves opening 5 stores in Indiana at the cost of $1,800,000.Under the other proposal,the company would focus on Kentucky and open 6 stores at a cost of $2,400,000.The following information is available: $$\begin{array} { | l | l | l | } \hline & \text { Indiana proposal } & \text { Kentucky proposal } \\\hline \text { Required investment } & \$ 1,800,000 & \$ 2,400,000 \\\hline \text { Estimated life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & \$ 50,000 & \$ 80,000 \\\hline \begin{array} { l } \text { Estimated annual cash inflows over } \\\text { the next 10 years }\end{array} & \$ 400,000 & \$ 500,000 \\\hline \text { Required rate of return } & 10 \% &10\% \\\hline\end{array}$$
- The payback period for the Indiana proposal is closest to:

• A)3.6 years.
• B)4.5 years.
• C)4.8 years.
• D)36.0 years.

---

Definitions:

SWOT Analysis

A strategic planning tool that assesses Strengths, Weaknesses, Opportunities, and Threats related to a business or project.

Organizational Assessment Tools

Instruments and methodologies used to evaluate an organization's effectiveness, efficiency, strengths, weaknesses, and overall performance.

Strategic Plans

Documents that outline an organization's goals and the strategies it will employ to achieve them over a specific period.

Building Relationships

The process of developing and maintaining connections with individuals or groups, often based on mutual respect and cooperation.