Compute the cash payback period

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Reference no: EM132690520

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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