Platte Woodworks is evaluating two capital investment proposals for a retail outlet store, each requiring an investment

Question:

Platte Woodworks is evaluating two capital investment proposals for a retail outlet store, each requiring an investment of $350,000 and each with an eight-year life and expected total net cash flows of $560,000. Location 1 is expected to provide equal annual net cash flows of $70,000, and Location 2 is expected to have the following unequal annual net cash flows:

Year 1$125,000

Year 285,000

Year 370,000

Year 470,000

Year 570,000

Year 660,000

Year 740,000

Year 840,000

Determine the cash payback period for both location proposals.

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...