Business: Cash Payback Period Primera Banco is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $402,000 and each with an eight-year life and expected total net cash flows of $536,000. Location 1 is expected to provide equal annual net cash flows of $67,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $145,000 Year 2 105,000 Year 3 68,000 Year 4 52,000 Year 5 32,000 Year 6 64,000 Year 7 44,000 Year 8 26,000 Determine

Cash Payback Period Primera Banco is evaluating

munchyswish

22.07.2021

Answer and Explanation:

The computation of the payback period for both the locations is shown below;

For location 1

= $402,000 ÷ $67,000

= 6 years

And, for location 2

Year Cash flows Cumulative cash flows

1 $145,000 $145,000

2 $105,000 $250,000

3 $68,000 $318,000

4 $52,000 $370,000

5 $32,000 $402,000

So, the payback period for location 2 is 5 years

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