Problem - Cash payback period
Primera Banco is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $360,000 and each with an 8-year life and expected total net cash flows of $480,000. Location 1 is expected to provide equal annual net cash flows of $60,000, and Location 2 is expected to have the following unequal annual net cash flows:
|
Year 1
|
$120,000
|
|
Year 5
|
$30,000
|
|
Year 2
|
90,000
|
|
Year 6
|
30,000
|
|
Year 3
|
75,000
|
|
Year 7
|
30,000
|
|
Year 4
|
75,000
|
|
Year 8
|
30,000
|
Required - Determine the cash payback period for both location proposals.