Question: Tucker Technology is considering two alternative
Tucker Technology is considering two alternative proposals for modernizing its production facilities. To provide a basis for selection, the cost accounting department has developed the following data regarding the expected annual operating results for the two proposals. Items in addition to depreciation may have attributed to differences in the estimated annual cash flow and net income figures shown below.
Instructions:
a. For each proposal, compute the (1) payback period, (2) return on average investment, and (3) net present value, discounted at an annual rate of 15 percent. (Round the return on investment to the nearest tenth of a percent.) Use Exhibits 26–3 and 26–4 where necessary.
b. On the basis of your analysis in part a, state which proposal you would recommend and explain the reasons for your choice.
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