Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows of $120,000, while the net cash flows for Proposal K are as follows: Year 1 $250,000 Year 2 200,000 Year 3 100,000 Year 4 90,000 Year 5 60,000 Year 6 20,000 $720,000 The difference between the payback periods of the two project is ___ years.

Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows of $120,000, while the net cash flows for Proposal K are as follows: Year 1 $250,000 Year 2 200,000 Year 3 100,000 Year 4 90,000 Year 5 60,000 Year 6 20,000 $720,000 The difference between the payback periods of the two project is ___ years.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EB: Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two,...

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Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
Proposals M and N each cost $550,000, have 6-year lives, and have expected total cash flows of $750,000. Proposal M is expected to provide equal annual net cash flows of $125,000, while the net cash flows for Proposal N are as follows: Year 1 $250,000 Year 2 200,000 Year 3 150,000 Year 4 75,000 Year 5 50,000 Year 6 25,000 $750,000 Determine the cash payback period for each proposal. Round your answers to three decimal places. Proposal M ________?_______ years Proposal N ________?________years
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