Primera Banco is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment

Question:

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 5 Year 6 $30,000 Year 1 $120,000 Year 2 30,000 30,000 90,000 Year 3 Year 7 75,000 Year 8 Year 4 75,000 30,000

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,...