2 Semester Cengage Now, Warren Accounting
26th Edition
ISBN: 9781305662308
Author: WARREN
Publisher: Cengage
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Chapter 26, Problem 26.5EX
To determine
Cash payback method:
Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.
Cash flow is the monetary consideration (return or income) received by the business for its long-term capital investment.
The cash payback period for location 1 and location 2 proposals.
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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
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Determine the cash payback period for both location proposals.
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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 $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:
$68,000
$22,000
Year 1
Year 5
Year 2
51,000
Year 6
16,000
Year 3
31,000
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13,000
Year 4
29,000
Year 8
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Determine the cash payback period for both location proposals.
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Location 2
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1
2
4
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6
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8
un
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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.
Chapter 26 Solutions
2 Semester Cengage Now, Warren Accounting
Ch. 26 - What are the principal objections to the use of...Ch. 26 - Discuss the principal limitations of the cash...Ch. 26 - Prob. 3DQCh. 26 - Your boss has suggested that a one-year payback...Ch. 26 - Prob. 5DQCh. 26 - Prob. 6DQCh. 26 - A net present value analysis used to evaluate a...Ch. 26 - Two projects haw an identical net present value of...Ch. 26 - Prob. 9DQCh. 26 - What are the major disadvantages of the use of the...
Ch. 26 - Prob. 11DQCh. 26 - Give an example of a qualitative factor that...Ch. 26 - Prob. 26.1APECh. 26 - Average rate of return Determine the average rate...Ch. 26 - Prob. 26.2APECh. 26 - Cash payback period A project has estimated annual...Ch. 26 - Prob. 26.3APECh. 26 - Net present value A project has estimated annual...Ch. 26 - Internal rate of return A project is estimated to...Ch. 26 - Internal rate of return A project is estimated to...Ch. 26 - Prob. 26.5APECh. 26 - Prob. 26.5BPECh. 26 - Average rate of return The following data are...Ch. 26 - Average rate of returncost savings Midwest...Ch. 26 - Average rate of return-new product Galactic Inc....Ch. 26 - Prob. 26.4EXCh. 26 - Prob. 26.5EXCh. 26 - Cash payback method Lily Products Company is...Ch. 26 - Prob. 26.7EXCh. 26 - Prob. 26.8EXCh. 26 - Prob. 26.9EXCh. 26 - Prob. 26.10EXCh. 26 - Prob. 26.11EXCh. 26 - Prob. 26.12EXCh. 26 - Net present value method and present value index...Ch. 26 - Prob. 26.14EXCh. 26 - Cash payback period, net present value analysis,...Ch. 26 - Internal rate of return method The internal rate...Ch. 26 - Prob. 26.17EXCh. 26 - Internal rate of return methodtwo projects Munch N...Ch. 26 - Prob. 26.19EXCh. 26 - Prob. 26.20EXCh. 26 - Prob. 26.21EXCh. 26 - Prob. 26.22EXCh. 26 - Average rate of return method, net present value...Ch. 26 - Cash payback period, net present value method, and...Ch. 26 - Net present value method, present value index, and...Ch. 26 - Prob. 26.4APRCh. 26 - Alternative capital investments The investment...Ch. 26 - Capital rationing decision for a service company...Ch. 26 - Average rate of return method, net present value...Ch. 26 - Prob. 26.2BPRCh. 26 - Prob. 26.3BPRCh. 26 - Net present value method, internal rate of return...Ch. 26 - Prob. 26.5BPRCh. 26 - Capital rationing decision for a service company...Ch. 26 - Ethics in Action Danielle Hastings was recently...Ch. 26 - Prob. 26.2CPCh. 26 - Global Electronics Inc. invested 1,000,000 to...Ch. 26 - Qualitative issues in investment analysis The...Ch. 26 - Prob. 26.5CP
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