Jane’s Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $200,000 and each with an eight-year life and expected total net cash flows of $320,000. Location 1 is expected to provide equal annual net cash flows of $40,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $90,000 Year 2 68,000 Year 3 42,000 Year 4 38,000 Year 5 29,000 Year 6 22,000 Year 7 17,000 Year 8 14,000 Determine the cash payback period for both location proposals.
Jane’s Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $200,000 and each with an eight-year life and expected total net cash flows of $320,000. Location 1 is expected to provide equal annual net cash flows of $40,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $90,000 Year 2 68,000 Year 3 42,000 Year 4 38,000 Year 5 29,000 Year 6 22,000 Year 7 17,000 Year 8 14,000 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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Jane’s Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $200,000 and each with an eight-year life and expected total net cash flows of $320,000. Location 1 is expected to provide equal annual net cash flows of $40,000, and Location 2 is expected to have the following unequal annual net cash flows:
| Year 1 | $90,000 |
| Year 2 | 68,000 |
| Year 3 | 42,000 |
| Year 4 | 38,000 |
| Year 5 | 29,000 |
| Year 6 | 22,000 |
| Year 7 | 17,000 |
| Year 8 | 14,000 |
Determine the cash payback period for both location proposals.
| Location 1 |
|
| Location 2 |
|
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