Proposals L and K Each Cost $500,000, Have 6-Year Lives

question 19

Essay

Proposals L and K each cost $500,000, have 6-year lives, and have expected total cash flows of $750,000.Proposal L is expected to provide equal annual net cash flows of $125,000, while the net cash flows for Proposal K are as follows:
​ $$\begin{array} { l r } \text { Year 1 } & \$ 250,000 \\\text { Year 2 } & 200,000 \\\text { Year 3 } & 100,000 \\\text { Year 4 } & 90,000 \\\text { Year 5 } & 60,000 \\\text { Year 6 } & 50,000 \\& \underline { \mathbf { \$ 75 } 0,000 } \\\hline\end{array}$$ ​
Determine the cash payback period for each proposal.

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Definitions:

Adjusted Trial Balance

An adjusted trial balance is a listing of all company accounts that will appear in the financial statements after adjusting entries have been made for the accounting period.

Income Statement

A financial statement that shows a company's revenue and expenses over a specified period, leading to the net income or loss for the period.

End-Of-Period Spreadsheet

A tool used in accounting to summarize account balances and adjustments at the end of an accounting period, aiding in the preparation of financial statements.

Journalized Closing Entries

These are the final entries made in the accounting ledger to close the books at the end of an accounting period, ensuring that income and expense accounts are properly reset for the next period.