Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows of $120,000, while the net cash flows for Proposal K are as follows: Year 1 $250,000 Year 2 200,000 Year 3 100,000 Year 4 90,000 Year 5 60,000 Year 6 20,000 $720,000 The difference between the payback periods of the two project is ___ years.
Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows of $120,000, while the net cash flows for Proposal K are as follows: Year 1 $250,000 Year 2 200,000 Year 3 100,000 Year 4 90,000 Year 5 60,000 Year 6 20,000 $720,000 The difference between the payback periods of the two project is ___ years.
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 2BE
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Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows of $120,000, while the net cash flows for Proposal K are as follows:
|
Year 1 |
$250,000 |
|
Year 2 |
200,000 |
|
Year 3 |
100,000 |
|
Year 4 |
90,000 |
|
Year 5 |
60,000 |
|
Year 6 |
20,000 |
|
|
$720,000 |
The difference between the payback periods of the two project is ___ years.
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