Answered: Determine the cash payback period for…

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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Cash payback period for a Service Company

Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $180,000 and each with an eight-year life and expected total net cash flows of $360,000. Location 1 is expected to provide equal annual net cash flows of $45,000, and Location 2 is expected to have the following unequal annual net cash flows:

Year 1	$81,000		Year 5	$43,000
Year 2	61,000	Year 6	32,000
Year 3	38,000	Year 7	25,000
Year 4	58,000	Year 8	22,000

Determine the cash payback period for both location proposals.

Location 1	years
Location 2	years

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