Chat with AI
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 21
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).
2. Calculate the payback period for the car wash facility (uneven cash flows). Which project should be accepted based on payback analysis? Explain.
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?
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).
2. Calculate the payback period for the car wash facility (uneven cash flows). Which project should be accepted based on payback analysis? Explain.
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?
Explanation
Verified
Verified
1. The payback period is the time requir...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
