Payback Period

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.

Storage facility: Even cash flows of $$120,000$ per year

Car wash: $$112,500,$ $$142,500,$ $$60,000,$ $$120,000,$ and $$90,000$

Required:

$1.$ Calculate the payback period for the storage facility $($even cash flows$).$

fill in the blank $1$

years

$2.$ Calculate the payback period for the car wash facility $($uneven cash flows$).$ Round your answer to three decimal places.

fill in the blank $2$

years

Which project should be accepted based on payback analysis?

$3.$ What if a third mutually exclusive project, a laundry facility, became available with the same investment and annual cash flows of $$150,000?$

Now which project would be chosen?