Griffith Vehicle Has Received Three Proposals for Its New Vehicle-Painting

question 62

Essay

Griffith Vehicle has received three proposals for its new vehicle-painting machine.Information on each proposal is as follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Proposal X } & \text { Proposal Y } & \text { Proposal Z } \\\hline \text { Initial investment in equipment } & \$ 240,000 & \$ 150,000 & \$ 190,000 \\\hline \text { Working capital needed } & 0 & 0 & 10,000 \\\hline \text { Annual cash saved by operations: } & & & \\\hline \text { Year 1 } & 80,000 & 50,000 & 80,000 \\\hline \text { Year 2 } & 80,000 & 42,000 & 80,000 \\\hline \text { Year 3 } & 80,000 & 46,000 & 80,000 \\\hline \text { Year 4 } & 80,000 & 24,000 & 80,000 \\\hline \text { Salvage value end of year: } & & & \\\hline \text { Year 1 } & 100,000 & 80,000 & 60,000 \\\hline \text { Year 2 } & 80,000 & 60,000 & 50,000 \\\hline \text { Year 3 } & 40,000 & 40,000 & 30,000 \\\hline \text { Year 4 } & 10,000 & 20,000 & 15,000 \\\hline \text { Working capital returned } & 0 & 0 & 10,000 \\\hline\end{array}$$ Required:
Determine each proposal's payback.

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Definitions:

Invested Money

Funds allocated by individuals or entities into financial instruments or assets with the expectation of generating income or profit.

Interest Rates

The amount charged by lenders as a percentage of the principal, as the cost for borrowing money.

Compounded Quarterly

A method of calculating interest where the accrued interest is added to the principal sum four times a year, affecting future interest calculations.

Saving Account

A savings account in a banking institution that guarantees the safety of the deposited money while offering a low interest rate.