nations trust is evaluating two capital investment proposals for the drive-up at

Question

nations trust is evaluating two capital investment proposals for the drive-up atm kiosk, each requiring an investment of $320,000 and each with an eight-year life and expected total net cash flows of $512,000. location 1 is expected to provide equal annual net cash flows of $64,000 and location 2 is expected to have the floowing unequal annual net cash flow.

year 1 $110,000

year 2 $80,000

year 3 $70,000

year 4 $60,000

year 5 $48,000

year 6 $48,000

year 7 $48,000

year 8 $48,000

determine the cash payback period for both location proposals.

Explanation / Answer

the cash payback period for

Location 1 proposal = 320,000/64000 = 5Year

Location 2 Proposal = 4Year

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