First Union Bank Corporation is evaluating two capital investment proposals for a drive up ATM kiosk, each requiring an investment of $300,000 and each with an eight year life and expected total net cash flows of $480,000. Location 1 is expected to provide equal annual net cash flows of $60,000, and Location 2 is expected to have the following unequal annual net cash flows:
|
Year 1 |
$90,000 |
Year 5 |
$45,000 |
|
Year 2 |
80,000 |
Year 6 |
45,000 |
|
Year 3 |
65,000 |
Year 7 |
45,000 |
|
Year 4 |
65,000 |
Year 8 |
45,000 |
Determine the cash payback period for both proposals.