3.

Cash payback period for a service company

Haukea Clothing Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $125,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows:

Year	Amount	Year	Amount
Year 1	$56,000	Year 5	$18,000
Year 2	43,000	Year 6	14,000
Year 3	26,000	Year 7	11,000
Year 4	24,000	Year 8	8,000

Determine the cash payback period for both location proposals.

Location	Year
Location 1	years
Location 2	years