Cash Payback Period for a Service Company

Chinook Industries Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $900,000 and each with an eight-year life and expected total net cash flows of $1,000,000. Location 1 is expected to provide equal annual net cash flows of $200,000, and Location 2 is expected to have the following unequal annual net cash flows:

Year 1	$300,000		Year 5	$50,000
Year 2	220,000		Year 6	50,000
Year 3	180,000		Year 7	30,000
Year 4	150,000		Year 8	20,000

Determine the cash payback period for both location proposals.

Location 1
Location 2

A project has estimated annual cash flows of $90,000 for 3 years and is estimated to cost $250,000. Assume a minimum acceptable rate of return of 10%.

Present Value of $1 at Compound Interest

Year		6%		10%		12%
1		0.943		0.909		0.893
2		0.890		0.826		0.797
3		0.840		0.751		0.712
4		0.792		0.683		0.636
5		0.747		0.621		0.567

Present Value of an Annuity of $1 at Compound Interest

Year		6%		10%		12%
1		0.943		0.909		0.893
2		1.833		1.736		1.690
3		2.673		2.487		2.402
4		3.465		3.170		3.037
5		4.212		3.791		3.605

Use the tables above.

a. Determine the net present value of the project. Enter negative values as negative numbers. $fill in the blank 1

b. Determine the present value index. Round your answer to two decimal places. fill in the blank 2