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 $225,000 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 $88,000
Year 2 65,000
Year 3 43,000
Year 4 29,000
Year 5 47,000
Year 6 38,000
Year 7 27,000
Year 8 23,000
Determine the cash payback period for both location proposals.
Location 1 5 years
Location 2 ?
