Solution-Compute the cash payback period

Compute the cash payback period

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Problem - Cash payback period, net present value method, and analysis

Runway Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:

Year	Plant Expansion	Retail Store Expansion
1	$ 350,000	$ 360,000
2	350,000	340,000
3	140,000	140,000
4	90,000	100,000
5	70,000	60,000
Total	$1,000,000	$1,000,000

Each project requires an investment of $700,000. A rate of 15% has been selected for the net present value analysis.

Instructions -

1. Compute the following for each product:

a. Cash payback period.

b. The net present value. Use the present value of $1 table appearing in this chapter.

2. Prepare a brief report advising management on the relative merits of each project.

Reference no: EM132690520

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Compute the cash payback period

Reference no: EM132690520

Reference no: EM132690520

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