**Cash Payback Period for a Service Company**Jane’s Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000.- **Location 1**: Expected to provide equal annual net cash flows of $30,000.- **Location 2**: Expected to have the following unequal annual net cash flows: - Year 1: $68,000 - Year 2: $51,000 - Year 3: $31,000 - Year 4: $29,000 - Year 5: $22,000 - Year 6: $16,000 - Year 7: $13,000 - Year 8: $10,000Determine the cash payback period for both location proposals.- **Location 1**: _______ years- **Location 2**: _______ years

Payback period refers to the time period that is required to recover the initial cost. With the help of the payback period, the management can get the break-even time also. We can get payback period by dividing initial investment with annual cash flow.Pay back period =Year before full recovery+Unrecovered cost at start of the yearCash flow during the year Location 1 = 8 year Location 2 = 8 years

Business

Accounting

Cash Payback Period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $68,000 Year 2 51,000 Year 3 31,000 Year 4 29,000 Year 5 22,000 Year 6 16,000 Year 7 13,000 Year 8 10,000 Determine the cash payback period for both location proposals. Location 1 years Location 2 years

Cash Payback Period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $68,000 Year 2 51,000 Year 3 31,000 Year 4 29,000 Year 5 22,000 Year 6 16,000 Year 7 13,000 Year 8 10,000 Determine the cash payback period for both location proposals. Location 1 years Location 2 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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