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Proposals A and B each cost $600,000 and have 5-year lives. Proposal A is expected to provide equal annual net cash flows of $259,000, while
Proposals A and B each cost $600,000 and have 5-year lives. Proposal A is expected to provide equal annual net cash flows of $259,000, while the net cash flows for Proposal B are as follows:
Year 1 | $150,000 |
Year 2 | 140,000 |
Year 3 | 110,000 |
Year 4 | 150,000 |
Year 5 | 50,000 |
$600,000 |
Determine the cash payback period for each proposal. Round answers to two decimal places. Which proposal has a better payback period?
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