Ch$19$ Homework

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CEX. $19\mathrm{.}02.$ALGO

Payback Period

CEX$\mathrm{.}19\mathrm{.}03.$ALGO

Jan Booth is considering investing in either a storage facility or a car wash facility. Both projects have a five$-$year life and require an investment of $$360,000.$ The cash flow patterns for each project are given below.

CEX. $19\mathrm{.}05$

Storage facility: Even cash flows of $$200,000$ per year

CEX. $19\mathrm{.}06.$ALGO

Car wash: $$112,600,$$$143,000,$$$63,000,$$$122,000,$ and $$96,000$

CEX. $19\mathrm{.}04$

Required:

CEX. $19\mathrm{.}01.$ALGO

Calculate the payback period for the storage facility $($even cash flows$).$ Round your answer to one decimal place. years

Calculate the payback period for the car wash facility $($uneven cash flows$).$ Round your answer to three decimal places.

years

Which project should be accepted based on payback analysis?

What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $$230,000?$

Now which project would be chosen?