Asked by V?n Linh Nguy?n on Jun 26, 2024
Verified
Proposals M and N each cost $550,000, have six-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:?? 
Determine the cash payback period for each proposal.
Cash Payback Period
The length of time it takes for an investment to generate enough cash flow to recoup the original investment.
Annual Net Cash Flows
The net amount of cash that is received or expended by a business during a year, after all cash inflows and outflows are accounted for.
Expected Total Cash Flows
The anticipated sum of all cash inflows and outflows associated with an investment over a specific period.
- Compute and comprehend the significance of the cash payback period in making investment choices.
Verified Answer
AP
Akash PolakampalliJul 01, 2024
Final Answer :
Proposal M: $550,000/$125,000 = 4.4 yearsProposal N: $250,000 + $200,000 + 2/3
($150,000) = $550,000 = 2 2/3 years
($150,000) = $550,000 = 2 2/3 years
Learning Objectives
- Compute and comprehend the significance of the cash payback period in making investment choices.