Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $125,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $56,000 Year 5 $18,000 Year 2 43,000 Year 6 14,000 Year 3 26,000 Year 7 11,000 Year 4 24,000 Year 8 8,000 Determine the cash payback period for both location proposals.
Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $125,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $56,000 Year 5 $18,000 Year 2 43,000 Year 6 14,000 Year 3 26,000 Year 7 11,000 Year 4 24,000 Year 8 8,000 Determine the cash payback period for both location proposals.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 5E: Cash payback period for a service company Janes Clothing Inc. is evaluating two capital investment...
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Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $125,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows:
| Year 1 | $56,000 | Year 5 | $18,000 | |
| Year 2 | 43,000 | Year 6 | 14,000 | |
| Year 3 | 26,000 | Year 7 | 11,000 | |
| Year 4 | 24,000 | Year 8 | 8,000 |
Determine the cash payback period for both location proposals.
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