Fidelity Bancorp Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an

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Fidelity Bancorp Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $280,000 and each with an eight-year life and expected total net cash flows of $448,000. Location 1 is expected to provide equal annual net cash flows of $56,000, and Location 2 is expected to have the following unequal annual net cash flows:

Year 1................................. $90,000

Year 2................................. 70,000

Year 3................................. 60,000

Year 4................................. 60,000

Year 5................................. 42,000

Year 6................................. 42,000

Year 7................................. 42,000

Year 8................................. 42,000

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,...
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Financial and Managerial Accounting

ISBN: 978-1285866307

13th edition

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

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