Cash Payback Period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals...

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Cash Payback Period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $59,000 Year 2 44,000 Year 3 29,000 Year 4 18,000 Year 5 31,000 Year 6 25,000 Year 7 18,000 Year 8 16,000 Determine the cash payback period for both location proposals. Location 1 Location 2 years years Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $120,000 of equipment, having a four-year useful life: Net Income Year 1 $50,000 Year 2 24,000 Year 3 Year 4 10,000 6,000 Net Cash Flow $80,000 54,000 40,000 36,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value b. Would management be likely to look with favor on the proposal? the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%. Cash Payback Period for a Service Company Jane's Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $150,000 and each with an eight-year life and expected total net cash flows of $240,000. Location 1 is expected to provide equal annual net cash flows of $30,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $59,000 Year 2 44,000 Year 3 29,000 Year 4 18,000 Year 5 31,000 Year 6 25,000 Year 7 18,000 Year 8 16,000 Determine the cash payback period for both location proposals. Location 1 Location 2 years years Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $120,000 of equipment, having a four-year useful life: Net Income Year 1 $50,000 Year 2 24,000 Year 3 Year 4 10,000 6,000 Net Cash Flow $80,000 54,000 40,000 36,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value b. Would management be likely to look with favor on the proposal? the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%.

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Answer Lets start by calculating the cash payback period for both location proposals and then move o... View the full answer